“The turbulence in financial markets has intensified and external growth is now expected to be clearly weaker, particularly in the euro area. In order to dampen the impact on the Norwegian economy, the Executive Board has decided to lower the key policy rate”, says Deputy Governor Jan F. Qvigstad.

Inflation is low. Even though activity in the Norwegian economy remains robust, primarily driven by petroleum investment and a high level of housing construction, a number of indicators suggest lower growth ahead. There is a high degree of uncertainty as to economic developments in the coming months. The debt situation in the euro area has led to considerable problems in the European banking system and in money and credit markets. Market funding has also become more expensive and less accessible for Norwegian banks.

“In order to guard against an economic setback and even lower inflation, we are of the view that a reduction in the key policy rate is now appropriate”, says the Deputy Governor.

For further information, see ”The Executive Board’s monetary policy decision – background and general assessment” and “The Executive Board’s assessment” in the October 2011 Monetary Policy Report.

• Charts and background material