The Committee assesses that a higher policy rate is still needed to dampen inflation. Consumer prices have risen rapidly, and inflation is markedly above target. Activity in the Norwegian economy is still high, and unemployment has remained very low. At the same time, the economy is slowing down, and higher inflation is reducing household purchasing power. An easing of economic pressures will help curb inflation further out.

Since the September Report, inflation has been higher than projected and is expected to remain high for longer than previously projected. At the same time, the labour market appears to be a little tighter than anticipated. On the other hand, the policy rate has been raised considerably over a short period of time, and monetary policy has started to have a tightening effect on the economy. There are signs that the slowdown may prove somewhat more pronounced than envisaged in September.

The future path of the policy rate will depend on economic developments.

"The forecasts for the Norwegian economy are more uncertain than normal, but if the economy evolves as anticipated, the policy rate will be around 3 percent next year", says Governor Ida Wolden Bache.

If the pressures in the economy persist, and signs emerge that inflation will remain high for longer than currently projected, a higher policy rate may be needed than currently envisaged. If inflation falls faster or unemployment rises more than projected, the policy rate may be lower than projected.

Norges Bank will hold a press conference following the monetary policy meeting in January.