Meeting 14 August 2019

Norges Bank’s Executive Board has decided to keep the policy rate unchanged at 1.25 percent.

In Monetary Policy Report 2/19, which was published on 20 June 2019, the Executive Board’s assessment was that capacity utilisation in the Norwegian economy was somewhat above a normal level. Underlying inflation was a little higher than the 2 percent inflation target. The policy rate was raised by 0.25 percentage point to 1.25 percent. The Executive Board’s assessment of the outlook and balance of risks suggested that the policy rate would most likely be increased further in the course of 2019.

At the Executive Board’s meeting of 14 August, new information was assessed against the projections in the June Report.

Growth prospects for Norway’s trading partners appear to be a little weaker than assumed in June. GDP growth in 2019 Q2 was broadly as projected, while forward-looking indicators have fallen further in a number of countries. Trade tensions between the US and China have deepened. The UK’s future relationship with the EU remains unclarified after a new government took office in summer. Trading partners’ forward rates have fallen. In the US, the policy rate was lowered in July. Oil prices are broadly the same as in June.

Estimated Norwegian forward rates have fallen. The krone has recently depreciated markedly and is weaker than assumed in June.

Growth in the Norwegian economy is solid, in line with the projections in the June Report. Mainland GDP rose by 0.7 percent in the period between March and May compared with the previous three-month period. Developments in house prices and household debt have been broadly as assumed in June.

Labour market developments appear to be broadly as projected. Registered unemployment has been fairly stable in recent months, and was 2.3 percent in July.

Inflation is close to the target. In July, the 12-month rise in the consumer price index (CPI) was 1.9 percent. Adjusted for tax changes and excluding energy products (CPI-ATE), inflation was 2.2 percent, a little lower than projected.

The Executive Board’s assessment is that the upturn in the Norwegian economy is continuing broadly as expected in June. Underlying inflation has been a little lower than projected. Deepening trade tensions and heightened uncertainty surrounding the UK’s relationship with the EU may weigh on growth abroad and in Norway. On the other hand, a weaker krone may contribute to higher inflation ahead. Overall, new information indicates that the outlook for the policy rate for the period ahead is little changed since the June Report. The global risk outlook entails greater uncertainty about policy rates going forward.

The Executive Board decided to keep the policy rate unchanged at 1.25 percent. The decision was unanimous.

Charts - monetary policy meeting (pdf)