There are prospects that inflation will be lower than expected earlier. This implies, in isolation, a lower key policy rate in the period ahead. On the other hand, the upturn in the real economy appears to have taken hold, and unemployment has declined. Inflation expectations appear to be firmly anchored. With a key policy rate close to the current level, there are prospects that inflation will pick up again further out. An even lower key policy rate could lead to a further acceleration in house price inflation and debt accumulation.

"Monetary policy is expansionary and supportive of structural adjustments in the Norwegian economy. The Executive Board's 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 forecast for the key policy rate in Monetary Policy Report 1/17 is close to ½% in the coming years. At the same time, the forecast implies a slightly higher probability of a decrease than an increase in the key policy rate in the coming period. The forecast is little changed from the December Report, but suggests that the key policy rate will remain close to the current level somewhat longer than projected earlier.

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