6  1)  Percent 6 Policy rate Capacity utilisation  5  5  4  4  3  3  2  2  1  1  0  0  2005  2008  2011  2014  2017  ECONOMIC PERSPECTIVES 13 FEBRUARY 2020  2020  Capacity utilisation is Norges Bank's output gap projecton for the Norwegian economy. Source: Statistics Norway  The primary responsibility of monetary policy is to provide the economy with a nominal anchor, quantified as the Bank’s inflation target. Monetary policy can contribute to high and stable output and employment and to counteracting the build-up of financial imbalances. In normal times, monetary policy is the first line of defence in stabilising the economy. The policy rate can be changed quickly when the economy is exposed to shocks. Given the structure of the Norwegian credit market, where floating interest rates predominate, the policy rate is an effective tool. The inflation targeting regime must be flexible. Norges Bank’s close to 20 years’ experience with inflation targeting suggests that a small, open economy must expect inflation to deviate fairly widely from the target from time to time. However, inflation has remained within a range where deviations from the target cannot be said to have entailed material economic costs. This has provided leeway to give weight to other considerations in interest-rate setting. During the most recent downturn, the krone exchange rate fell in pace with oil prices. This led to prospects for higher inflation.
14  BIS central bankers’ speeches  Appendix Chart 1 – GDP wealth and employment GDP  Chart 2 – GDP in different recessions Real GDP (Peak = 100) 1929 Crash 120 1970 Recession 1980 Recession 115 1990 Recession 2008 Recession 110  Index, 2007 = 100 150  Employment Wealth*  140 130  105  120  100  110  95  100 2007  2009  2011  2013  2015  90  90 0 1 2 3 4 5 6 7 8 Number of years following onset of recession  Sources: ONS and Bank calculations. * Total net wealth; the property component of wealth is estimated for 2015 using by growing the 2014 figure by the rate of increase in house prices. Sources: ONS and Bank calculations. Chart 3 – GDP and disposable income per head  Chart 4 – Measures of disposable income per head  GDP per head  Indices, 2007 = 100  Indices, 2007 = 100  105  Real Net National Disposable Income (RNNDI) per head  100 100  95 Real Household Disposable Income (RHDI) per head Real median household disposable income (equivilised)*  95  2005  2007  2009  2011  Sources: ONS and Bank calculations. BIS central bankers’ speeches  2013  105  90 2015  2000  2003  2006  2009  2012  90 85  80 2015  Sources: ONS. * Data show income per households with these equivilised in size to make them comparable.