Norges Bank
Executive Board meeting
24 September 2008
1
Norges Bank
Financial incidents
• Bear Stearns, 17 March
• Roskilde Bank, 24 August
• Fannie Mae and Freddie Mac, 7 September
• Merrill Lynch, 14 September
• Lehman Brothers, 14 September
• AIG, 17 September
• HBOS, 17 September
Norges Bank
CDS prices for selected banks
Basis points. 2 July 2007 – 22 September 2008
400
300
UBS
Bank of America
200
iTraxx Europe index
JPMorgan Chase
Citigroup
100
DnB NOR
0
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Source: Bloomberg
Norges Bank
Effective yields on covered bonds
5-7 years average term to maturity. Percentage points
5 January 2004 – 19 September 2008
7
7
6
5
5
Denmark
4
3
6
UK
4
Spain
Norway1)
Ireland
3
Germany
2
Jan-04
1)
2
Jan-05
Jan-06
The regulation relating to covered bonds entered into
force on 01.06.07
Jan-07
Jan-08
Sources: Bloomberg and Reuters EcoWin
Norges Bank
Difference between money market rates and
expected key rates1)
1.8
Percentage points. 5-day moving average
2 July 2007 – 22 September 2008
1.8
1.6
1.6
1.4
1.4
1.2
1.2
1
1
0.8
0.8
0.6
0.6
0.4
0.2
0
Jul-07
1)
12-month US
12-month UK
12-month Norway
12-month Euro area
3-month US
3-month UK
3-month Norway
3-month Euro area
0.4
0.2
0
Jan-08
Jul-08
Jul-07
The expected key rate is measured by the Overnight Indexed Swap (OIS). For
Norway, the estimates are based on key policy rate expectations in the market.
Jan-08
Jul-08
Sources: Bloomberg, Thomson
Reuters and Norges Bank
Norges Bank
Equities
Indices, 1 July 2007 = 100. 1 July 2007 – 22 September 2008
130
130
Emerging markets
120
110
120
Norway, OSEBX
US, S&P 500
110
100
100
90
90
80
80
70
Europe Stoxx
70
Japan, Topix
60
Jul-07
60
Sep-07 Nov-07
Jan-08 Mar-08 May-08
Jul-08
Sep-08
Source: Thomson Reuters
Norges Bank
Implied volatility from equity options
1 January 2005 – 19 September 2008
40
40
30
30
Norway
20
20
10
10
US
Europe
0
Jan-05
0
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Sources: Reuters EcoWin and Oslo Stock Exchange
Norges Bank
Global Risk Index
Expected volatility between USD, EUR and JPY in per cent1)
1 January 2005 – 22 September 2008
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Jan-05
1) GRI
Jan-06
Jan-07
is based on implied volatility derived from prices on 3-month
currency options between EUR, USD and JPY (equally weighted)
Jan-08
Source: Bloomberg
Norges Bank
Implied volatility in the Norwegian exchange market
Based on 1-month currency option prices
1 January 2005 – 22 September 2007
20
20
18
18
16
16
14
14
12
12
Volatility USDNOK
10
10
8
8
6
6
Volatility EURNOK
4
4
2
Jan-05
2
Jan-06
Jan-07
Jan-08
Source: Bloomberg
Norges Bank
3-month interest rate differential
and import-weighted exchange rate (I-44)1)
January 2002 – December 2010
85
5
I-44
(right-hand scale)
88
23 September 2008
91
4
3
22 September 2008
94
2
25 June 2008
97
1
100
103
0
Weighted interest rate
differential (left-hand scale)
2002
1)
2003
2004
2005
-1
2006
2007
2008
2009
2010
A rising curve denotes an appreciation of the krone.
Sources: Reuters and Norges Bank
Norges Bank
Growth forecasts Consensus Forecasts
GDP. Percentage change on previous year
2008
11
10
10
June
9
9
8
8
September
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
US
Euro
2009
11
UK
China 26 TP India
June
September
US
Euro
UK
China 26 TP India
Source: Consensus Forecasts
Norges Bank
International commodity prices1)
Oil price (Brent Blend)
in USD per barrel
Index. Week 1 2002 = 100
Week 1 2002 – week 38 2008
Futures prices (broken lines)
160
350
140
140
300
120
120
100
100
160
20.06.08 (MPR 2/08)
60
60
40
40
20
20
1)
In XDR
0
2004
2006
2008
2010
Non-food
agriculturals
Food
250
200
All items
80
80
300
Metals
200
22.09.08
0
2002
250
350
Industrials
150
150
100
100
50
50
0
2002
0
2004
2006
2008
Sources: Thomson Reuters and Norges Bank
Norges Bank
Consumer prices abroad
12-month change. Per cent. January 2002 – August 2008
20
20 20
20
Russia
15
15 15
10
10 10
15
10
Brazil
5
US
Sweden
5
5
5
UK
India1)
0
0
0
0
China
Japan
Euro area
-5
Jan-02
1)
-5
Jan-04
Wholesale prices
Jan-06
Jan-08
-5
Jan-02
-5
Jan-04
Jan-06
Jan-08
Source: Thomson Reuters
Norges Bank
Policy rates and estimated forward rates
Per cent. 2 January 2005 – 22 September 2008
7
7
6
6
5
UK
5
4
4
Euro area
3
3
US
2
1
0
Jan-05
2
22 September 2008
Sweden
Market after MPR 2/08
(25 June)
1
0
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Sources: Thomson Reuters and Norges Bank
Norges Bank
Consumer prices
12-month change. Per cent. January 2002 – July 2008
5
5
CPI
2.5
2.5
CPIXE1)
0
-2.5
2002
1)
0
-2.5
2003
2004
2005
2006
2007
2008
CPIXE: CPI adjusted for tax changes and excluding temporary changes in energy prices
15
Sources: Statistics Norway and Norges Bank
Norges Bank
Mainland GDP – half-year figures
Change from previous half year. Per cent. Annual rate. 2005 Q1 – 2008 Q2
8
8
7
7
6
6
5
5
4
4
3
3
MPR 2/08
2
2
QNA Q2
1
1
0
0
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Sources: Statistics Norway and Norges Bank
Norges Bank
Hourly productivity, mainland Norway
4-quarter change. 5-quarter moving average. Per cent. 1997 Q1 – 2008 Q2
5
5
4
4
3
3
2
2
Average
1997 Q1 – 2008 Q2
1
0
1997
1
0
1999
2001
2003
2005
2007
Sources: Statistics Norway and Norges Bank
Norges Bank
Fixed investment in oil extraction
and pipeline transport
NOK billion. Seasonally adjusted figures. 2002 Q1 – 2008 Q2
30
25
20
15
10
2002
2003
2004
2005
2006
2007
2008
Source: Statistics Norway
18
Norges Bank
Norges Bank's regional network: capacity constraints
Per cent. January 2005 – August 2008
70
70
Capacity1)
60
60
50
50
Labour2)
40
30
30
20
20
10
10
0
Jan-05
1) Share
2)
40
0
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
reporting that they would have some or considerable difficulty in accommodating an increase in demand.
Share who respond that the supply of labour will be a limiting factor for output/turnover.
Source: Norges Bank
Norges Bank
Expected change in selling prices
over the next 12 months. Diffusion index¹)
65
65
Retail trade and
services to the
household sector
60
55
55
50
50
45
45
40
40
Manufacturing, building
and construction and
corporate services
35
Jan-05
35
30
30
1)
60
Jul-05
Jan-06
Jul-06
Jan-07
Share reporting higher prices + (0.5 * share reporting unchanged prices)
Jul-07
Jan-08
Jul-08
Source: Norges Bank
Norges Bank
Retail trade components
January 2004 = 100. Volume. Seasonally adjusted.
January 2004 – July 2008
140
140
Other goods
130
120
130
Sale of motor
vehicles and
automotive fuel
120
Total
110
110
100
100
90
Food, beverages and
tobacco
Electricity and fuel
80
Jan-04
90
80
Jan-05
Jan-06
Jan-07
Jan-08
Sources: Statistics Norway and Norges Bank
Norges Bank
Unemployed
Percentage of labour force. Seasonally adjusted.
January 1998 – August 2008
6
6
Registered unemployed and on
labour market programmes
5
5
LFS unemployment
4
4
3
3
Registered unemployed
2
2
1
1998
1
2000
2002
2004
2006
2008
Sources: Statistics Norway, Norwegian Labour and Welfare Administration (NAV) and Norges Bank
Norges Bank
Employment
Figures from LFS and QNA. 1000 persons
Monthly and quarterly figures. February 1998 – June 2008
2650
2650
2600
2600
QNA
2550
2550
2500
2500
2450
2450
2400
LFS
2400
2350
2350
2300
2300
2250
2250
2200
2200
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Statistics Norway
Norges Bank
Labour migration
In thousands. January 2006 – August 2008
120
120
100
100
Registered work permits
(UDI)
80
80
60
60
Registered work permits –
new EEA countries (UDI)
40
20
40
Registered foreign employees from
new EEA countries (SSU)
0
20
0
Jan-06
Jan-07
Jan-08
Sources: Central Office – Foreign Tax Affairs (SSU), Norwegian Directorate of Immigration (UDI) and Norges Bank
Norges Bank
Labour migration
12-month change. January 2007 – August 2008
30
30
Registered work permits
(UDI)
25
25
20
20
Registered work permits –
new EEA countries (UDI)
15
15
10
10
Registered foreign employees from
new EEA countries (SSU)
5
0
5
0
Jan-07
Jul-07
Jan-08
Jul-08
Sources: Central Office – Foreign Tax Affairs (SSU), Norwegian Directorate of Immigration (UDI) and Norges Bank
Norges Bank
Housing investment
and order reserves housing construction
2000 Q1 – 2008 Q2
26000
210
24000
190
22000
170
Housing
investment1),
(left-hand scale)
20000
18000
150
Order reserves housing
construction (volume2)),
(right-hand scale)
130
16000
110
14000
12000
2002
1)
Measured at constant 2005-prices, mill. NOK. Seasonally adjusted
2)
Deflated by the building construction index
90
70
2003
2004
2005
2006
2007
2008
Sources: Statistics Norway and Norges Bank
Norges Bank
Building starts
In 1000 m2. Trend. January 2002 – July 2008
900
900
800
800
700
700
600
600
500
500
Other buildings
400
400
300
300
200
200
Dwellings
100
100
0
2002
0
2003
2004
2005
2006
2007
2008
Source: Statistics Norway
Norges Bank
Property prices and credit
Growth from same month/half-year previous year. Per cent.
Households
Enterprises
50
50
45
45
40
40
35
35
30
30
House
prices
25
20
15
Credit
25
20
15
10
10
5
5
0
0
-5
-5
-10
2002 2003 2004 2005 2006 2007 2008
Commercial property
prices
Credit
-10
2002 2003 2004 2005 2006 2007 2008
Sources: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, Finn.no, ECON
Pöyry, Statistics Norway and Norges Bank
Norges Bank
More expensive financing
Short-term financing
Long-term financing
Difference between money market rates and
Indicative credit spreads for Norwegian
expected key policy rate in Norway. Percentage
bonds. 5 years to maturity. Difference to
points. 5-day moving average.
swap rates. Percentage points.
2 July 2007 – 17 Sep. 2008
Weekly figures. 2 July 2007 – 17 Sep. 2008
1.6
1.6
1.6
1.6
1.4
1.4
1.4
1.4
1.2
1.2
1.2
1
1
Bank bonds
12-month rate
1
1.2
1
0.8
0.8
0.6
0.6
0.4
0.4
Covered bonds
0.2
0
-0.2
Jul-07 Oct-07 Jan-08 Apr-08 Jul-08
0.2
0
-0.2
0.8
0.8
0.6
0.6
3-month rate
0.4
0.4
0.2
0.2
0
Jul-07 Oct-07 Jan-08 Apr-08 Jul-08
0
Sources: Bloomberg, Thomson Reuters, DnB NOR Markets and Norges Bank
Norges Bank
Key policy rate, money market rate1) and banks’
lending rate on new loans2)
Per cent. 1 July 2007 – 22 September 2008
7.5
7.5
Mortgage rate
7.0
6.5
7.0
Money market rate
6.5
6.0
6.0
Key policy rate
1)
2)
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
Jul-07
3.5
Sep-07 Nov-07
Jan-08 Mar-08 May-08
3-month NIBOR.
Interest rates on new mortgage loans of NOK 1 million within 60% of purchase price with
floating interest rate. Figures for the 20 largest banks, weighted according to market share.
Jul-08
Sep-08
Sources: Norsk familieøkonomi AS 30
and Norges Bank
Norges Bank
Key policy rate in the baseline scenario
and estimated forward rates
Per cent. 2008 Q4 – 2010 Q4
7.0
7.0
Market after publication of MPR 2/08 (25 June)
6.0
6.0
Baseline scenario MPR 2/08
5.0
5.0
Market 22 September 2008
4.0
4.0
2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
Sources: Thomson Reuters and Norges Bank
Norges Bank
Key policy rate
9
9
8
7
6
2/07
3/07
1/08
2/08
7
MPR 2/08
6
1/07
5
5
3/06
2/06
4
3
8
Strategy interval
1/05 2/05
3/04
3/05
4
1/06
3
2
2
1
1
0
2005
0
2006
2007
2008
2009
2010
2011
Source: Norges Bank 32