On 2 March, the Government laid down a new Regulation on Monetary Policy. The inflation target is now 2 percent, compared with the previous 2.5 percent. The new regulation will not result in significant changes in the conduct of monetary policy. The inflation targeting regime is flexible, and weight is given to developments in output and employment. A lower numerical target in and of itself is of little importance for the interest rate outlook in the coming period.

The upturn abroad and in Norway is continuing. Economic growth appears to be somewhat stronger than expected, and the output gap for Norway is closing. Underlying inflation is low, but rising capacity utilisation will probably push up price and wage inflation further out.

Monetary policy is expansionary. The outlook for the Norwegian economy suggests that it will soon be appropriate to raise the key policy rate. The uncertainty surrounding the effects of a higher interest rate suggests a cautious approach. Overall, the changes in the outlook and the balance of risks imply a somewhat earlier interest rate increase than in the December 2017 Monetary Policy Report.

"The Executive Board's current assessment of the outlook and balance of risks suggests that the key policy rate will most likely be raised after summer 2018", says Governor Øystein Olsen.

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