The slowdown in global growth has been more pronounced and spanned a longer period than we had expected. The Norwegian economy has also felt the effects of this. Norges Bank has therefore lowered the sight deposit rate from 7 to 5.5 per cent since 11 December, most recently on 5 March. The interest rate differential has narrowed. Since mid-January, the krone has depreciated, partly reflecting expectations of lower interest rates. Monetary policy has been relaxed. There is uncertainty associated with developments in many of the factors that will influence inflation ahead, among others the exchange rate. This implies a gradual approach to the conduct of monetary policy. Increased spending of petroleum revenues will have implications for Norway’s industry structure. High demand for goods and services that require domestic resources, necessitates higher employment in the sheltered sector. This labour has to be recruited from the exposed sector, or through the natural increase in the labour force finding its way to the sheltered sector. Even if employment and output in Norwegian manufacturing industry fall, developments for Norwegian enterprises may not necessarily be only negative. Some enterprises may be at the cutting edge of technology, and increase their efficiency in pace with the rise in costs in Norway. Others may relocate labour-intensive activities abroad. The scaling back of manufacturing still involves a risk. It makes the economy more vulnerable; the foundation for learning, innovation and development may be undermined when a smaller share of the business sector is exposed to intense international competition.
Also in most ten-year periods, investing in US equities has been profitable, with the exception of the depression in the 1930s and the last half of the 1970s. Equity returns have been negative after ten years only in the years between 1928 and 1938, in other words on equity investments made the year before the 1929 stock market crash. It may also be worth noting that equities purchased during recessions - such as in the mid-1930s and mid-1970s - brought solid returns ten years later. The picture is the same for most other countries. Since short-term fluctuations in equity prices are difficult to predict, it may be a sound strategy to keep the share of equities constant over time. This means buying a relatively large volume of equities when prices are low, and buying a smaller volume - or selling - when prices are high. This is the strategy applied by the Petroleum Fund. Let us now revert to the Norwegian economy and Norwegian economic policy. The revision of economic policy in March 2001 can to some extent be said to be a consequence of our oil economy. The new guidelines have also changed the interaction between the different components of economic policy. Fiscal policy will now have an expansionary effect. In order to prevent pressure from becoming too strong, monetary policy has to be tighter than would otherwise have been the case. Monetary policy has therefore been given a clearer role in stabilising economic developments.