Consumer prices have risen sharply, and inflation is markedly above the target. Activity in the Norwegian economy is high, and the labour market is tight. High inflation and higher interest rates are weakening household purchasing power, and many firms expect a fall in activity ahead.

Based on the Committee’s current assessment of the outlook, the policy rate will need to be increased somewhat further to bring inflation down towards the target. Since Monetary Policy Report 4/22, the labour market appears to have been a little tighter than projected. Continued pressures in the Norwegian economy may contribute to keeping inflation elevated. These developments could suggest raising the policy rate at this meeting. On the other hand, there are prospects that energy prices will be lower than expected earlier, and global inflationary pressures appear to be easing. 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. This may suggest a more gradual approach to policy rate setting.

The outlook for the Norwegian economy is more uncertain than normal.

“The future policy rate path will depend on economic developments. The policy rate will most likely be raised in March”, says Governor Ida Wolden Bache.