The growth prospects for imports among Norway’s trading partners have weakened somewhat since June, and expected policy rates abroad have declined slightly. Oil prices are at about the same level as before summer, while the krone has appreciated somewhat. The Norwegian money market premium has increased and been higher than expected.

Inflation in Norway has been unexpectedly high in recent months. At the same time, there are signs that growth in the Norwegian economy is picking up at a slightly faster pace than projected in June. House price inflation has accelerated and been higher than projected. Low interest rates may contribute to a persistently high rate of increase in house prices and increase the vulnerability of the financial system. On the other hand, growth in the Norwegian economy is moderate, and capacity utilisation is below a normal level. As a result of low cost growth and a somewhat stronger krone, inflation is likely to recede further ahead.

“Our current assessment of the outlook suggests that the key policy rate will most likely remain at today’s level in the period ahead,” says Governor Øystein Olsen.

The analyses in this Report suggest that the key policy rate will remain close to ½ percent in the next few years. At the same time, the key policy rate forecast implies a slightly higher probability of a decrease than an increase in the key policy rate in the year ahead.

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