In the March Monetary Policy Report, we projected a pronounced rebound in activity in the Norwegian economy in the second half of 2021 as a large proportion of the population is vaccinated, and a continued upswing into 2022. Unemployment was projected to fall in pace with the rise in activity. At the same time, inflation was expected to moderate ahead, to somewhat below the inflation target, before moving up again. We projected that house price inflation would be dampened as a result of a gradual rise in lending rates, a normalisation of household consumption patterns and an increase in residential construction. With regard to fiscal policy, we have assumed that public spending – in line with the fiscal rule – would be reduced as and when the situation permits. Conclusion Let me conclude. When I was here last year, the economic outlook was gloomy. We had just set the policy rate lower than it had ever been, and we were highly uncertain about what lay ahead. Since then, we have been through several waves of higher infection rates and strict containment measures. Nevertheless, economic activity has rebounded strongly from the trough in spring 2020, and many of those who became unemployed have fortunately re-entered the workforce. We are now pleased to note that infection rates are heading downward and that the reopening of society is underway. There is still uncertainty about the road ahead, but we can see the light at the end of the tunnel. Thank you for your attention.
The sluggishness of the recovery in many advanced economies from the global financial crisis – the so-called Great Recession - was striking even by historical standards. For example, the level of activity in the UK lies very significantly below its level at the equivalent stage following the 1930s depression (Chart 7). The UK’s Great Recession was far-worse than the Great Depression. A number of factors are believed responsible for the persistence of weak global demand. One often given prominence was heightened risk-aversion among lenders, consumers and businesses, which in turn constrained credit and spending growth in the economy. This so-called “psychological scarring” of risk appetite was also a dampener of credit and aggregate demand following the Great Depression. 7  7  Malmendier and Nagel (2011). 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  On the supply-side of the economy, several factors have contributed to subdued global inflation over recent decades.