svein gjedrem : the economic situation in norway address by mr svein gjedrem, governor of norges bank ( central bank of norway ), to invited foreign embassy representatives, norges bank, 21 march 2002. please note that the text below may differ slightly from the actual presentation. * * * your excellencies, ladies and gentlemen the economic outlook the world economy has been experiencing a slowdown. economic growth stagnated in the us and the euro area in the last three quarters of 2001. growth remained somewhat firmer in the uk, but was moderate towards the end of the year. gdp has fallen in japan. in most countries, public and private consumption fuelled growth in demand, while a fall in capital formation and inventories has exerted downward pressure. growth in the us economy came to a halt last spring. overinvestment, particularly in it and telecom equipment led to low returns on capital and reduced corporate earnings. the stock market declined when growth prospects were revised. the unemployment rate rose. terrorism and war added to the uncertainty. the us economy is flexible and seldom remains in recession for a long period. there are some signs of an early recovery. monetary policy and fiscal easing have supported continued growth in private consumption. equity prices, commodity prices and long - term interest rates have picked up since the sharp decline following the events of september 11. oil prices plunged by around 40 per cent between autumn 2000 and the end of 2001. developments towards the end of last year were marked by lower demand for oil. in december, the opec countries together with russia, mexico and norway decided to limit oil production. this may have contributed to increasing the oil price during the last months. the risk of war in the middle east and the decline in commercial oil stocks in the us may also have contributed to increasing the oil price. oil prices plunged by around 40 per cent between autumn 2000 and the end of 2001. developments towards the end of last year were marked by lower demand for oil. in december, the opec countries together with russia, mexico and norway decided to limit oil production. this may have contributed to increasing the oil price during the last months. the risk of war in the middle east and the decline in commercial oil stocks in the us may also have contributed to increasing the oil price. the global slowdown started to have ripple effects on the norwegian economy during autumn and winter. prices for important norwegian export products fell, and markets for many export industries have

was perceived as asymmetric, effectively setting a 2 % ceiling for inflation. this asymmetry very likely contributed to lowering inflation expectations and thereby inflation itself. the new symmetric inflation target is expected to influence long - term inflation expectations and to anchor them more solidly to the 2 % inflation target. when we published our new symmetric inflation target in july 2021, the operating environment for monetary policy was changing dramatically. slide 5. inflation is converging towards the ecb's 2 % target the supply shocks, caused first by the pandemic and then by russia's unjustified and brutal war in ukraine, pushed the euro area inflation rate above 2. 5 % for the first time in nine years by the fall of 2021, and then all the way up to 10. 6 % in october 2022. thanks to the normalisation of energy prices and the determined but very consistent monetary tightening, euro area hicp inflation is now at 2. 4 %. it is expected to decline further, reaching our inflation target next year. when i addressed this forum a year and a half ago, in october 2022, the uncertainty related to energy supply in europe was extreme. rationing of energy supplies was widely discussed. so were the various risk scenarios, some containing severe stagflationary tendencies. at the time, energy was the key driver of euro area inflation, while moderate wage inflation was acting as an anchor. subsequently, europe reacted decisively and cut the energy crisis short. today, wages have replaced energy as the main inflation driver – but wage growth is now moderating and inflation declining. due to the energy price assumptions, our inflation forecasts overestimated actual inflation in the fourth quarter last year. for this year, our assumptions and inflation forecasts have been more accurate, although in march we did revise down our inflation forecast for this year to 2. 3 %. in september last year, our 2024 inflation forecast was at 3. 2 %, so we have in fact been approaching our target faster than we had expected at the time we raised the policy rate to the current level. however, disinflation is more than just a story of the reversal in energy price movements. monetary policy has played an important role in dampening demand since the rate hiking cycle started in july 2022. monetary restraint is continuing to reduce inflation and impact the real economy strongly, affecting the growth outlook, particularly for this year. in march, we also revised down our growth