Capacity utilisation in the Norwegian economy appears to be higher than envisaged earlier. Inflation is lower than expected and may continue to drift down in the months ahead, but increased activity and receding unemployment suggest that inflation will pick up. Inflation expectations appear to be firmly anchored. Low house price inflation will curb debt accumulation, but it will take time for household vulnerabilities to recede.

"The Executive Board's current assessment of the outlook and the balance of risks suggests that the key policy rate will remain at today's level in the period ahead," says Governor Øystein Olsen.

In Monetary Policy Report 2/17, the key policy rate is forecast to be 0.5 percent in 2017 and 2018, rising gradually from 2019. The forecast is little changed on the March Report, but is a little higher in 2017 and 2018, and a little lower towards the end of the forecast horizon.

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