OCED Economic Survey of Norway 2008 – Executive Summary: “The Norwegian economy has been flourishing of late, enjoying substantial real income growth with low inflation and very low unemployment. Benefiting from rising world energy prices and favourable supply shocks in the wake of globalisation, this good performance also reflects fiscal restraint, broadly successful monetary policy and the economy’s capacity to attract foreign labour. Macroeconomic policy is nevertheless facing a number of difficult challenges, both in the short and medium terms.

The inflation targeting framework used by Norges Bank has worked well but faces a difficult period. Although financial market conditions had tightened, the spring of 2008 saw core inflation rising close to the central bank’s inflation target, while headline inflation was high and fluctuating. The monetary stance may need to tighten further if demand pressure continues and cost-inflation accelerates or import prices pick up. But with downside risks from high household debt and the still uncertain resolution of the sub prime crisis and ensuing financial turmoil, a cautious approach is required.”