this had an impact on exchange rate developments. in addition, special factors in the global economy led to a stronger krone than might have been expected from the higher interest rate differential alone. themes in foreign exchange markets shift. in periods, investor focus on stock returns feeds through to exchange rate movements. during periods of political and economic unrest, investors may choose individual currencies as a safe haven. in autumn 2002, the norwegian krone was probably also perceived as a safe haven. over the past 18 months, developments in the interest rate differential between norway and other countries appear to have had a particularly marked impact on our currency. norwegian interest rates have been pushed down towards the level prevailing abroad. through 2003, the interest rate differential has narrowed as a result of monetary policy easing. the interest rate has been reduced by 5¼ percentage points and is now approximately the same as among our trading partners. through 2003 and up to march 2004, the krone depreciated by about 15 per cent, measured by the import - weighted index i - 44. since the monetary policy meeting on march, the krone has appreciated again by about 3½ per cent. inflation has edged up, but is still low. in march, inflation stood at 0. 3 per cent. apart from some temporary, technical factors that may together account for 3 - 4 tenths of a percentage point, three main factors have contributed to explaining the substantial deviation from the inflation target : • first, the global downturn had considerable implications for the impact of interest - rate setting in norway, via the exchange rate and other channels. the strong krone contributed to low inflationary pressures. the depreciation in the krone exchange rate since january 2003 has not resulted in a significant rise in prices for imported consumer goods, as might have been expected. in recent months, however, there have been signs of higher prices for imported goods. clothing prices in particular slowed in march. • second, low external inflation and rapid shifts in the international division of labour have resulted in a fall in prices for imported goods and services. this also applies when these prices are measured in terms of what norwegian importers pay in foreign currency. • the change in trade patterns has made a considerable contribution to the sharp decline in prices for clothing, footwear and audiovisual equipment. we have nonetheless observed that the fall in prices for clothing has been somewhat more subdued in svalbard than on the mainland, partly due to the higher incidence of snowscooter

more favourable schemes. the proposal implies that many private sector employees that are not currently covered by a company pension scheme will be included in the proposed scheme. the proportion of employees without any employment - based pension is greatest in retail trade, the hotel and restaurant sector and the construction industry. financial stability developments in real economic variables are mirrored in credit markets. in recent years, household income has shown solid growth, and household confidence has been high. however, corporate earnings have been low, and until recently enterprises have primarily focused on enhancing efficiency. credit developments are giving ambiguous signals to our interest - rate setting. growth in household borrowing is high, but enterprises have reduced debt. the change in the breakdown of credit may have been amplified by banks ’ increased eagerness to extend credit to households after a period of losses on loans to the business sector. some reports from our regional network indicate that are some liquidity constraints for the business sector in some areas. according to reports from northern norway, banks seem to have become more cautious in extending loans to the business sector. banks are requiring higher levels of capital and earning capacity. total credit is expanding broadly in line with normal growth in nominal gdp. developments in credit to enterprises shadow developments in their investments. low credit growth indicates that corporate investment in the mainland economy has still not picked up even though there seem to be signs that the decline is levelling out somewhat. norwegian households generally finance their mortgages at an interest rate that follows the short - term money market rate. floating interest rates tend to vary widely over time. the interest rate level is very low at present, and long - term investments cannot rely on this interest rate spanning the life of a housing loan. according to money market expectations, the interest rate will eventually stabilise around 5½ per cent. this is consistent with an inflation target of 2½ per cent and a long - term real interest rate in line with the level abroad. this interest rate, with a mark - up for banks ’ margins, provides a more realistic expression of the interest rate level that will apply over the loan ’ s life than the floating interest rate prevailing today. when the interest rate is abnormally low, it can be particularly challenging for borrowers to assess their debt - servicing capacity over time. such a low interest rate also places particular demands on banks in assessing the creditworthiness of borrowers. but experience has shown that the underlying cause of loan defaults can be overly optimistic assessments on the part of both the lender and borrow