Norges Bank

1

Executive Board meeting30 May 2007

Norges Bank

2

0

1

2

3

4

5

6

7

8

9

World NorthAmerica

WesternEurope

Japan Asiaexcl.

Japan

EasternEurope

LatinAmerica

Forecasts April

Forecasts May

0

1

2

3

4

5

6

7

8

World NorthAmerica

WesternEurope

Japan Asiaexcl.

Japan

EasternEurope

LatinAmerica

Forecasts April

Forecasts May

2007 2008

Growth forecasts Consensus ForecastsGDP. Percentage change on previous year

Source: Consensus Forecasts

Norges Bank

GDP - China and IndiaGrowth on same quarter previous year

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007

0

2

4

6

8

10

12

Source: Reuters

China

India

Norges Bank

4

House prices1) and housing starts in the USSeasonally adjusted. 12-month change2)

January 2003 – March 2007 (Housing starts to April)

-35

-25

-15

-5

5

15

2003 2004 2005 2006 2007

-35

-25

-15

-5

5

15

1) Median price for dwellings2) 3-month moving average

Housing starts

Existing dwellingsNew dwellings

Sources: Reuters and Norges Bank

Norges Bank

5

10

20

30

40

50

60

70

80

90

2002 2003 2004 2005 2006 2007 2008 2009

10

20

30

40

50

60

70

80

90

Oil price Brent Blend and futures prices USD per barrel. 3 January 2002 – 28 May 2007

28 May 2007

Sources: Telerate, IPE and Norges Bank

Previous monetary policy meeting (24 April 2007)

Norges Bank

6

80

90

100

110

120

130

140

150

Jan 06 Mar 06 May 06 Jul 06 Sep 06 Nov 06 Jan 07 Mar 07 May 07

80

90

100

110

120

130

140

150

Equities Indices,1 January 2006 = 100. 1 January 2006 – 28 May 2007

Euro area

US

Japan

Norway

Sources: Reuters

Emerging economies

Norges Bank

Sources: Reuters, Bloomberg and Norges Bank

0

1

2

3

4

5

6

Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10

0

1

2

3

4

5

6

US

Euro area

25 May 2007

Previous monetary policy meeting (24 April 2007)

Sweden

UK

Key policy rates and forward ratesAs at previous monetary policy meeting and as at 25 May 2007

7

Norges Bank

85

88

91

94

97

100

103

2002 2003 2004 2005 2006 2007 2008 2009 2010

-1

0

1

2

3

4

5

Sources: Bloomberg and Norges Bank

I-44 (left-hand scale)

Weighted interest rate differential (right-hand scale)

25 May 2007

1) A rising curve denotes an appreciation of the krone.

3-month interest rate differential and import-weighted exchange rate (I-44)1)

January 2002 – December 2010

Average 1-25 May 2007

8

Previous monetary policy meeting (24 April 2007)

Norges Bank

9

Norway's terms of trade2000 Q1 – 2007 Q1

0.8

1.0

1.2

1.4

00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1

0.8

1.0

1.2

1.4

Sources: Statistics Norway and Norges Bank

Overall terms of trade

Terms of trade traditional goods and services

Norges Bank

10

Inflation and interval for underlying inflation1) 12-month change. Per cent. January 2002 – April 2007

-2

0

2

4

6

2002 2003 2004 2005 2006 2007

-2

0

2

4

6

Highest indicator

Lowest indicator

CPI

Sources: Statistics Norway and Norges Bank

1) Highest and lowest indicator of the CPI-ATE, a weighted median and a trimmed mean of the sub-indices in the CPI.

Norges Bank

11

-3

-2

-1

0

1

2

3

Jun 04 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07

-3

-2

-1

0

1

2

3

Sources: Statistics Norway and Norges Bank

Goods and services produced in Norway (0.7)1)

1) Norges Bank's projections.

Imported consumer goods (0.3)1)

CPI-ATE

CPI-ATE Total and by supplier sector. 12-month change. Per cent

June 2004 – April 2007

Norges Bank

12

2220

2250

2280

2310

2340

2370

2400

2430

2460

1999 2001 2003 2005 2007 1999 2001 2003 2005 2007

0

2

4

6

Sources: Statistics Norway and Norwegian Labour and Welfare Organisation (NAV)

Labour market

1) The changes to the LFS have resulted in a break in the time series between 2005 and 2006.

LFS unemployment

Registered unemployed

EmploymentIn 1000s

UnemploymentPer cent. Seasonally adjusted

LFS1)

QNA

Norges Bank

14

Average monthly real wage growth in Poland

12-month growthUnemployment rate

Monthly figures. January 2001 – April 2007

-5

0

5

10

15

20

25

2001 2003 2005 2007

Total

Construction

Source: Reuters

0

5

10

15

20

25

2001 2003 2005 2007

Estonia

Poland

Latvia

Lithuania

Slovakia

Norway

Norges Bank

15

Manufacturing output index Volume index. Seasonally adjusted 3-month moving average and trend

94

96

98

100

102

104

106

108

110

2002 2003 2004 2005 2006 2007

94

96

98

100

102

104

106

108

110

Source: Statistics Norway

3-month moving average

Trend

Norges Bank

16

Indicator of resource shortage - business tendency survey for manufacturing

Per cent. 1983 Q1 – 2007 Q1

0

10

20

30

40

50

60

1983 1987 1991 1995 1999 2003 2007

0

10

20

30

40

50

60

Source: Statistics Norway

Norges Bank

17

-40

0

40

80

120

160

200

1997 1999 2001 2003 2005 2007

-40

0

40

80

120

160

200

Source: Statistics Norway

Annual growth in mainland enterprise sector credit, liquid assets and investment level

In billions of current NOK. Monthly figures. January 1997 – March 2007

1) Gross fixed capital formation. Mainland Norway excl. dwellings and public sector. Total last four quarters

Credit (C3)

Fixed investment1)

Liquid assets (M2)

Norges Bank

18

-30

-15

0

15

30

45

1992 1994 1996 1998 2000 2002 2004 2006

-30

-15

0

15

30

45

Source: TNS Gallup

TNS Gallup's household trend indicatorTrend. 1992 Q3 – 2007 Q2

Norges Bank

19

Retail sales index12-month growth. 3-month moving average. Per cent

January 2000 – February 2007

-2

0

2

4

6

8

10

Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07

-2

0

2

4

6

8

10

Sources: Statistics Norway and Norges Bank

Norges Bank

20

Household net lending and net financial wealth to income ratio

Last four quarters. 1997 Q1 - 2006 Q4

-80

-60

-40

-20

0

20

40

60

80

100

1997 1999 2001 2003 2005 2007

Source: Norges Bank

Net lending2)

Net financial wealth to income ratio1)

1) Net assets as a share of disposable income.2) In billions of NOK. Adjusted for estimated reinvested share dividends for 2000 – 2005.

2006

Net lending -60.9bn

+ Net revaluations 92.2bn

= Net change in assets 31.2bn

Norges Bank

21

House prices and household debtChange on same month/quarter previous year. Per cent

January 2001 – April 2007 (C2 March)

-5

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 20076

8

10

12

14

2001 2002 2003 2004 2005 2006 2007

House prices Household debt (C2)

Sources: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, Finn.no, ECON, Statistics Norway and Norges Bank

Real estate business

Statistics Norway

Norges Bank

22

Housing starts and housing investmentTotal over 12 months/4 quarters

January 2000 – March 2007 (Housing starts 2006 Q4)

10

20

30

40

2000 2001 2002 2003 2004 2005 2006 2007

20

40

60

80

100

Sources: Statistics Norway and Norges Bank

1) Constant 2004 prices.

Housing starts, in thousands (left-hand scale)

Housing investment, in billions of NOK1)

(right-hand scale)

Norges Bank

23

0

100

200

300

400

2002 2003 2004 2005 2006 2007

0

100

200

300

400

Commercial building startsArea (1000 m2)

3-month moving average. January 2002 – March 2007

Sources: Statistics Norway and Norges Bank

Norges Bank

Sources: Reuters and Norges Bank

3.0

3.5

4.0

4.5

5.0

5.5

6.0

07 Q2 07 Q4 08 Q2 08 Q4 09 Q2 09 Q4 10 Q2 10 Q4

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Market 25 May 2007 Baseline scenario MPR 1/07

Key policy rate in baseline scenario and estimated forward rates1)

Per cent. At 25 May 2007

1) A credit risk premium and a technical difference of 0.20 percentage point have been deducted to make the forward rates comparable with the key policy rate.

Market previous monetary policy meeting (24 April 2007)

24

Market cut-off MPR 1/07 (9 March 2007)

Norges Bank

3-month real interest rate1) and the normal real interest rate

Per cent. 1996 Q1 - 2007 Q1

0

1

2

3

4

5

6

7

1996 1998 2000 2002 2004 2006

0

1

2

3

4

5

6

7

Interval for normal real interest rate

Real interest rate

Source: Norges Bank 25

1) 3-month money market rate deflated by the 12-quarter moving average (centred) of inflation measured by the CPI.

Projections for the CPI from MPR 1/07 form the basis for this estimate.

Norges Bank

26

-1

0

1

2

3

4

2005 2006 2007 2008 2009 2010

-1

0

1

2

3

4

0

1

2

3

4

2005 2006 2007 2008 2009 2010

0

1

2

3

4

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008 2009 2010

0

1

2

3

4

5

6

7

8

9

-2

-1

0

1

2

3

4

2005 2006 2007 2008 2009 2010

-2

-1

0

1

2

3

4

Baseline scenario in Monetary Policy Report 1/07

30%

50%

70%

90%

Output gap

CPI-ATE

Key policy rate

CPI

Sources: Statistics Norway and Norges Bank

Norges Bank

27

Monetary policy strategy

• The interest rate path presented in Monetary Policy Report 1/07

reflects the Executive Board's trade-off between bringing inflation up

to target and stabilising developments in output and employment.

• In the light of this trade-off, the interest rate will be increased

gradually so that we can assess the effects of interest rate changes

and other new information about economic developments.

• The key policy rate should lie in the interval 4 – 5% in the period to

the publication of the next Report on 27 June 2007, conditional on

economic developments that are broadly in line with the projections.

Monetary Policy Report 1/07

Norges Bank

28

Executive Board meeting30 May 2007