Norges Bank's price inflation projection for 1997 adjusted upwards
Norges Bank projects consumer price inflation at 2¾-3 per cent in 1997, depending on future movements in the krone exchange rate. The upward adjustment from 2½ per cent since the December Inflation Report primarily reflects higher indirect taxes. The rise in prices for 1998 is estimated at 2-2½ per cent.
Commenting on the Inflation Report, Central Bank Governor Kjell Storvik states that the projections point to continued moderate price inflation, although there is still a risk of an acceleration in price and wage inflation.
"If our projections prove to be the outturn, consumption growth will reach 9 per cent between 1995 and 1997. Such rates have not been seen since the previous cyclical boom in 1985-1986. The sharp rise in house prices is also highly reminiscent of developments in the mid-1980s. Fiscal policy must assume responsibility for stabilising the economy. Monetary policy is oriented towards returning the krone exchange rate to its initial range as defined in the exchange rate regulation", says the Governor of Norges Bank.
Price inflation, excluding indirect taxes and electricity prices, is projected at 2-2¼ per cent in 1997 and 2-2½ per cent in 1998 following a rise in prices of 1½ per cent in 1996. These figures are closely in line with the projections in the December Inflation Report. Wage growth is estimated at 4½-4¾ per cent in 1997 and 5-5½ per cent in 1998.
Mainland GDP growth is projected at 3¼ per cent in 1997 and 2¾ per cent in 1998.
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