Svein Gjedrem: On business cycles, monetary policy and property markets Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Næringseiendom conference, Bergen, 12 May 2006. Please note that the text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 26 April, Inflation Report 1/06 and on previous speeches. The  Charts in pdf-format can be found on the Norges Bank’s website. *  *  *  Introduction Monetary policy in Norway is oriented towards low and stable inflation, with annual consumer price inflation of close to 2.5 per cent over time. This is also the most important contribution monetary policy can make to sound economic developments in the long term. Low and stable inflation provides the economy with a nominal anchor. This contributes to predictability for agents who look ahead when they make decisions about saving, investment, wages and prices. In its conduct of monetary policy, Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. Flexible inflation targeting builds a bridge between the long-term objective of monetary policy, which is to keep inflation on target and provide an anchor for inflation expectations, and the more short-term objective of stability in the real economy. Growth in the Norwegian economy has been strong since summer 2003.
Economic Tendency Survey of the National Institute of Economic Research Index, average = 100, standard deviation = 10 120  120  110  110  100  100  90  90  80  80  The Economic Tendency Indicator Mean +/- one standard deviation  70  70 00  02  04  06  08  10  12  Source: National Institute of Economic Research  10  BIS central bankers’ speeches  Figure 9. Labour force, employment and unemployment 1000s and percentage of the labour force, 15-74 age group 5 200  12  Labour force (left) Employed (left) Unemployment (right)  5 000  10  4 800  8  4 600  6  4 400  4  4 200  2  4 000  0 01  03  05  07  11  09  Source: Statistics Sweden  Figure 10. Repo rate, mortgage rates for households and bank interest rates for companies Per cent 7  7 Average bank interest rate for companies Average mortgage rate  6  6  Repo rate  5  5  4  4  3  3  2  2  1  1  0  0 06  07  08  09  10  11  12  Note. Per cent, monthly averages.