Interest rates are still low among many of our trading partners, in spite of the increases in several countries as a result of rising energy prices and higher consumer price inflation. In the US, there are now expectations that the interest rate peak has been reached, and that it will be lowered in the course of summer 2007. An increase in policy rates is expected in the euro area, Sweden, the UK, Australia, Japan and Switzerland in the coming year, but the increase is expected to be somewhat smaller than a few months ago. On the whole, the framework conditions for the Norwegian economy are favourable. Strong international growth implies solid growth for the export industry. The rise in export prices is high while the rise in import prices is low. The petroleum sector is generating growth impulses to the broader economy and the interest rate level is low. However, there is little slack in the Norwegian economy. A steadily rising share of enterprises lacks the capacity to accommodate increased demand, largely because of labour shortages. This must be taken into account in the formulation of monetary policy. Monetary policy In 2001, the Government and the Storting (Norwegian parliament) adopted new economic policy guidelines in Norway, partly against the background of the experience of the 1970s and 1980s. In the period 1972 to 1986, we experienced high and variable inflation. Consumer prices rose almost twice as much as in Germany.
As global capacity utilisation increases to a more normal level, demand for Norwegian exports might remain buoyant. A growing number of export enterprises are facing capacity constraints, particularly in the production of metals and refined petroleum products. Export growth in the years ahead will probably occur in industries such as the engineering and shipbuilding industries. Production growth is now high in these sectors, and employment is rising after declining for several years. High growth in the global economy has also pushed up prices for non-oil commodities. Rising commodity prices and buoyant activity in markets that are important for Norway have generated growth impulses to the Norwegian economy. Since May this year, commodity prices have varied  BIS Review 80/2006  3  widely, but on the whole edged up since end-June. International equity markets have stabilised since the turbulence in May, and have edged up since the previous monetary policy meeting. The benchmark index on the Oslo Stock Exchange is now about 15 per cent higher than at the beginning of the year. Interest rates are still low among many of our trading partners, in spite of the increases in several countries as a result of rising energy prices and higher consumer price inflation. In the US, there are now expectations that the rate tightening cycle is nearing an end, and that the policy rate will be lowered in the course of next summer. A rise in key rates is expected over the next year in the euro area, Sweden, the UK, Australia, Japan and Switzerland.