University of Oslo, Department of Economics
Ragnar Nymoen, 26 January 2009
Norwegian inflation forecasts, January 2009
This is the tenth of a sequence of forecasts of the Norwegian rate of inflation, using a small scale
econometric model to produce automatized inflation forecasts, AIFs. The methodological
approach of this project is presented in Nymoen (2005).
The forecasted variable is the 4 quarter rate of change in the Norwegian consumer price index,
adjusted for taxes and energy prices (CPI-ATE). The January 2009 AIF forecast is shown in the
fan-chart below. The point forecasts are shown as a black line, and the 90% prediction intervals
are indicated by the symmetric fans. The recent inflation history, from 2006(1) to 2008(4) is
shown in the red line.
AIF forecasts for CPIAET annual rate of inflation
0.035
0.030
0.025
0.020
0.015
0.010
0.005
2006
2007
2008
2009
2010
2011
2012
Inflation is projected to become 2.8% in the first quarter of 2009. In the following quarters, until
late in 2010, the point forecast are a little above 2.5%. In the second part of the period, the
model projects lower inflation.
The forecasting model does not make any special allowance for the extra uncertainty caused by
the unfolding financial crisis and its consequences for macroeconomic variables. Actual forecast
uncertainty is therefore even larger than the uncertainty presented in the graph.
The forecasting mechanism used (the AIF model) consists of an equation for the rate of inflation
(CPI-ATE), and 8 equations which are needed to forecast the explanatory variables of inflation:
the rate of unemployment, productivity growth, the nominal and the real exchange rates, foreign
inflation (in foreign currency), domestic and foreign interest rates and oil prices.
University of Oslo, Department of Economics
Ragnar Nymoen, 26 January 2009
The figure on this page shows the nominal 3-month interest rate (money market rate), which is
forecasted together with inflation and the other variables in the AIF forecasting model.
AIF forecasts for the 3-month interest rate
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
2006
2007
2008
2009
2010
2011
2012
Earlier forecasts, and the comparison of tthose forecasts with the Norwegian Central Bank’s
Forecasts are available on this project’s webpage.