Evaluation of Norges Bank's Projections for 2005

Abstract

In 2005, the rise in consumer prices adjusted for taxes and excluding energy products (CPI-ATE) was noticeably lower than projected in 2004. The deviation between the projections and actual developments is primarily ascribable to a stronger-than-expected exchange rate and lower-than-projected wage growth. After surprisingly low inflation at the beginning of the year, the projections published throughout 2005 were closely in line with actual price developments. Capacity utilisation in the Norwegian economy, as measured by the output gap, was somewhat lower than previously projected, but the deviation is small compared to the considerable degree of uncertainty surrounding this projection.