jarle bergo : the economic situation, global uncertainty and monetary policy speech by mr jarle bergo, deputy governor of norges bank ( central bank of norway ), at the annual general meeting of aci norge – the financial markets association, oslo, 6 september 2007. the text below may differ slightly from the actual presentation. the address is based on the assessments presented at norges bank ’ s press conference following the executive board ’ s monetary policy meeting on 15 august and in monetary policy report 2 / 07. * * * introduction first of all, i would like to thank you for inviting me to your annual general meeting. in modern central banks, increasing emphasis is placed on transparency and communication, and we feel that coming here to talk about monetary policy is an important part of our work to increase understanding of our activities. this has not always been the case in all central banks. for example, it was not until 1994 that the federal reserve began to publish its interest rate decisions. until that time, market participants had to follow changes in market interest rates in order to guess what decision the central bank had taken. i assume that most of you present here today are glad that time is past. in this address, i will first discuss economic developments in norway, and the orientation of monetary policy. i will then comment on the turbulence in international financial markets in recent weeks. i believe many of those present here have a special interest in developments in the exchange rate, and will therefore discuss this in more depth towards the end of the address. the economic situation and the orientation of monetary policy the norwegian economy is now in a cyclical upturn. over the past three years, mainland gdp has grown by approximately 4½ per cent annually, and the strong growth has continued in 2007. in the first half of the year, annualised growth was close to 6 per cent, and even if gdp growth in the third and fourth quarters should be zero, annual growth will be well over 4 per cent. as the chart shows, there have not been four consecutive years with such strong growth since 1971. at the same time, productivity growth in the norwegian economy has been strong, and the supply of labour has been ample. the growth capacity of the economy has therefore been high. low interest rates, growth in public demand and in petroleum investment and vigorous international growth have resulted in high income growth in the household and business sectors. moreover, low interest rates have made it more profitable to bring forward consumption. in addition

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