ida wolden bache : policy rate kept on hold introductory statement by ms ida wolden bache, governor of norges bank ( central bank of norway ), at the press conference following norway's announcement of the policy rate, oslo, 3 may 2024. * * * presentation accompanying the speech chart : policy rate kept unchanged at 4. 5 percent the monetary policy and financial stability committee has decided to keep the policy rate unchanged at 4. 5 percent. norges bank is tasked with keeping inflation low and stable. the operational target is inflation of close to 2 percent over time. we are also mandated to help keep employment as high as possible and to promote economic stability. in march, we signalled that the policy rate would likely be kept at 4. 5 percent for some time ahead. we have not produced forecasts this time, but we have assessed new information against the march forecasts. chart : slower disinflation internationally international price inflation has slowed considerably since peaking in 2022, but the decline in inflation has recently slowed. services prices are still rising rapidly in many countries. central banks abroad have held policy rates steady in recent months. the market's policy rate expectations have increased, and major central banks are now expected to make fewer rate cuts this year than anticipated in march. chart : somewhat weaker krone expectations of fewer rate cuts in the us have been accompanied by a broad appreciation of the us dollar, also against the krone. we are concerned with the krone exchange rate because it affects inflation and activity in the norwegian economy. a weaker krone means higher prices for imported goods. at the same time, the profitability of the export sector increases. that can lead to higher wage growth, which can in turn fuel inflation. chart : low growth in the norwegian economy the norwegian economy is cooling down. growth is low, and household consumption has declined so far this year. there are large differences between developments in the primary and secondary housing markets. while turnover is sluggish in the primary housing market, and construction activity is very low, the stock of unsold homes in the secondary market has declined markedly since autumn. prices in the secondary housing market have shown a clear rise so far this year. 1 / 3 bis - central bankers'speeches the labour market has become less tight in recent years. employment is high but employment growth has slowed. we have recently seen a small increase in the number of unemployed registered with nav, but unemployment is still low.

household consumption and debt. interest rates had to be kept at a high level in norway. the turnaround abroad took place two years ago, but the norwegian economy continued to show a high level of activity. this led to a widening of the interest rate differential against other countries. the main explanation for the wide interest rate differential is not that interest rates are high in norway, but that interest rates are at a historic low abroad. interest rates in the us have not been at such a low level since the 1960s. a further jump in wages in 2002 amplified the imbalances in the economy and fuelled the rise in prices for goods and services produced in norway. this is why monetary policy has been tight. the real interest rate, i. e. the interest rate adjusted for inflation, rose in 2000 and was thereafter somewhat higher than the average for the past 30 years. with the reductions in the key rate this winter, the real interest rate is no longer particularly high. the tight monetary stance is reflected in the strong krone. over the autumn and winter, it has become clear that global growth is weaker than we and other observers had expected. several central banks have responded by reducing interest rates further. interest rates in the us and europe are unusually low. global growth is still expected to pick up gradually towards a more normal level, but the upturn may come at a later stage than previously assumed. however, we cannot rule out that the world economy is headed for a fairly long period of stagnation. low interest rates in the us and europe are a reflection of this risk. weak external developments have had negative spillover effects on the norwegian economy through the appreciation of the krone, the fall in equity prices and lower demand for norwegian exports. unemployment has increased, primarily in service industries. the prospects for manufacturing industry are deteriorating. high wage growth is forcing many businesses and municipalities to cut costs and reduce their workforces. in 2002, inflation was close to target at 2. 3 per cent, but has been somewhat lower in recent months. the strong krone is the primary factor behind low price inflation. the rise in prices for domestically produced goods and services is marked by the considerably higher wage growth in norway relative to trading partners. wage growth moved up further last year, even in industries where profitability had been sharply eroded. a situation where wage growth does not react to the labour market outlook, can give rise to substantial real economic costs. developments over the past year show that monetary policy is effective