The labour market is still tight, but pressures in the Norwegian economy are easing. Inflation is markedly above the 2 percent target. Consumer price inflation has moved down, but underlying inflation is high.

Persistently high inflation imposes substantial costs on society. The longer inflation remains high, the more costly subsequent disinflation may prove to be. On the other hand, the Committee does not want to raise the policy rate more than is necessary to bring inflation back to target within a reasonable horizon.

Monetary policy is now having a tightening effect on the economy, and the full effects of the past rate hikes are yet to be seen. In the Committee’s assessment, the policy rate is likely close to the level needed to tackle inflation, which provides the Committee with a little more time to assess whether there is a need to raise the policy rate further.

There will likely be a need to maintain a tight monetary policy stance for some time ahead. Whether additional rate hikes will be needed depends on economic developments. Since the September 2023 Monetary Policy Report, inflation has fallen more than expected, and economic activity has been somewhat lower than projected. On the other hand, the krone depreciation may contribute to sustaining inflation.

“Based on the Committee’s current assessment of the outlook, the policy rate will likely be raised in December. The Committee will have received more information about the inflation outlook ahead of its monetary policy meeting in December. If the Committee becomes more assured that underlying inflation is on the decline, the policy rate may be kept on hold”, says Governor Ida Wolden Bache.

New forecasts have not been prepared for this monetary policy meeting. Monetary Policy Report 4/23 will be published along with the monetary policy decision on 14 December 2023.