Inflation is markedly above target. Underlying inflation has declined further but is still high. Unemployment is low, but economic growth is weak. Both inflation and economic activity have been broadly in line with the projections in the December 2023 Monetary Policy Report. The krone is stronger than expected. The overall prospects for the Norwegian economy do not appear to have changed materially since the previous Report.

“The Committee assesses that the policy rate is now sufficiently high to return inflation to target within a reasonable time horizon”, says Governor Ida Wolden Bache.

Monetary policy is having a tightening effect, and the economy is cooling down. At the same time, business costs have increased considerably in recent years, and continued high wage growth and the krone depreciation through 2023 will likely restrain disinflation. Consequently, there will likely be a need to maintain a tight monetary policy stance for some time ahead. Further out, when inflation falls back and economic conditions so warrant, the Committee can start lowering the policy rate.

There is uncertainty about future developments in the Norwegian economy. If cost inflation remains elevated, or the krone depreciates again, inflation may remain high for longer than previously projected. In that case, the Committee is prepared to raise the policy rate again. If there is a more pronounced slowdown in the Norwegian economy or inflation declines more rapidly, the policy rate may be lowered earlier than envisaged in December.

New forecasts have not been prepared for this monetary policy meeting. Monetary Policy Report 1/24 will be published along with the monetary policy decision on 21 March 2024.