jan f qvigstad : outlook for the norwegian economy address by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at sparebank 1 fredrikstad, 4 november 2009. the text below may differ slightly from the actual presentation. the speech is based on the assessments presented at norges bank ’ s press conference following the executive board ’ s monetary policy meeting on 28 october and monetary policy report 3 / 09. * * * the operational target of monetary policy in norway is low and stable inflation, with annual consumer price inflation of close to 2. 5 per cent over time. in recent years, average inflation has been close to, but somewhat below 2. 5 per cent. consumer price inflation has generally been somewhat below target since 2003 and monetary policy was then oriented towards pushing up inflation. in 2007 and 2008 inflation picked up to slightly above target. inflation expectations were firmly anchored and the key policy rate was gradually raised to a more normal level. inflation close to target and firmly anchored inflation expectations were essential for monetary policy to be effective when substantial cuts were made in the key policy rate in autumn 2008 and the beginning of 2009. it has been a year since financial turbulence developed into a full - blown crisis and resulted in the most severe downturn in the global economy since the second world war. the financial crisis eroded confidence in banks, counterparties and contractual partners. the measures implemented by central banks and governments have had a stabilising effect on financial markets. credit and money market premiums have decreased and activity has picked up. daily fluctuations have become less pronounced. with the improvement in financial markets over the past six months and the increase in the credit supply, global trade is now picking up slightly, albeit only gradually and from a low level. manufacturing output has recently risen in the us, japan and many emerging economies, while it continues to fall – albeit at a slower pace – in many euro area countries. manufacturing output in japan and the us is still at a very low level. despite the pickup in growth, capacity utilisation in advanced economies will remain very low for the next two - three years. uncertainty in equity markets has eased and risk premiums are lower, reflected in a rise in leading us stock indices of more than 50 per cent since equity markets bottomed out at the beginning of march 2009. oslo børs has risen by about 70 per cent since the beginning of march. the price of oil has risen somewhat since the june report

however cognisant of the current cost - push pressures and the potential of these to filter through to more generalised price pressures. these pressures will be closely monitored, and the mpc will take timeous action to ensure that second round effects do not take hold and that inflation pressures are kept in check. 6. conclusion to conclude, uncertainty in the global environment has not abated, as reflected by increased volatility in financial markets. while the global recovery has proceeded at a moderate pace, it remains unbalanced and uneven. to this end, the g20 is addressing issues of global imbalances and also reflecting on the future global monetary system. such developments will have an impact on south africa and policy developments going forward, as we are part of the global economy and one of the more liquid amongst emerging market financial markets. south africa ’ s growth outlook has improved, although it remains below pre - crisis levels and below that of other emerging and developing countries. inflation has recently trended higher, and while the bank ’ s forecast shows that cpi will breach the upper end of the target range, based on current information the mpc expects that this will be a temporary breach. however, developments will be closely monitored for any second round effects which could result in broader based price pressures. thank you. bis central bankers ’ speeches