"Developments in the Norwegian economy have been slightly weaker than expected and the economic outlook has deteriorated somewhat. The Board has therefore decided to reduce the key policy rate now", says Governor Øystein Olsen.

As expected, unemployment has increased. Wage growth in 2015 is set to be lower than projected in March. According to Norges Bank's regional network, output growth has edged down and reporting enterprises expect growth to remain weak over the next half-year. Further out, there are prospects that the decline in oil investment will be less pronounced than projected earlier.

Consumer price inflation is close to 2.5 percent. The krone depreciation in 2014 will underpin inflation in the coming period. Further ahead, lower wage growth and fading effects of a weaker krone will pull down on inflation. House prices have risen at a slower pace than expected, but household debt is steadily rising.

"The current assessment of the outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the course of autumn", says Governor Øystein Olsen.

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