In Monetary Policy Report 2/20, which was published on 18 June, the policy rate forecast indicated that the policy rate would remain at the current level over the next couple of years, followed by a gradual rise.

New information largely confirms the picture of the economic developments presented in the June Report. The Norwegian economy is in the midst of a deep downturn. Activity has picked up in recent months but remains lower than prior to the pandemic. Unemployment has declined but is still high. Underlying inflation has risen and is higher than the inflation target. The krone appreciation and prospects for low wage growth suggest that inflation will moderate further out.

In its assessment of the balance of risks, the Committee gave weight to the considerable uncertainty surrounding the further economic recovery. Recently, the spread of Covid-19 has increased, and some containment measures have been reintroduced. The Committee also focused on housing market developments. Persistently high house price inflation may result in accumulating financial imbalances.

“The Committee’s assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at today’s level for some time ahead”, says Governor Øystein Olsen.