Meeting 8 May 2019

Norges Bank's Executive Board has decided to keep the policy rate unchanged at 1.0 percent. The Executive Board's current assessment of the outlook and balance of risks suggests that the policy rate will most likely be raised in June.

In Monetary Policy Report 1/19, which was published on 21 March 2019, the Executive Board's assessment was that capacity utilisation in the Norwegian economy was slightly 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 1.0 percent in March. The Executive Board's assessment of the outlook and balance of risks suggested that the policy rate would most likely be raised in the course of the next half-year.

At the Executive Board's meeting of 8 May, new information was assessed against the projections in the March Report.

Economic growth among Norway's trading partners has been somewhat higher than expected. Growth has increased slightly in the US and the euro area. The trade tensions between China and the US are continuing, and the EU has approved a postponement of the UK's withdrawal date to 31 October 2019. Trading partners' forward rates have edged lower. Global equity prices are little changed since the March Report. Oil spot prices have risen and are higher than assumed. Futures prices have shown little change.

Estimated Norwegian forward rates have edged higher. The krone, measured by the import-weighted exchange rate index (I-44), is weaker than assumed in the March Report.

The upturn in the Norwegian economy continues. Mainland GDP rose by 0.6 percent in the three months between December and February compared with the previous three-month period. Growth in 2019 Q1 may be somewhat lower than assumed, owing in part to a fall in output in the electricity and fishing sectors in February. Private consumption has been a little higher than projected, and house prices have risen in line with the projections in the March Report.

Capacity utilisation in the Norwegian economy appears to be rising further. Labour market developments have been broadly as expected. Registered unemployment drifted down to 2.2 percent in April and was a little lower than expected. According to the Labour Force Survey (LFS), employment developments were weaker than anticipated.

In this year's wage settlement, the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO) agreed on a wage norm for manufacturing of 3.2 percent. The wage norm is consistent with the wage projection for 2019 in the March Report.

Inflation is a little higher than the inflation target. In March, the 12-month rise in the consumer price index (CPI) was 2.9 percent. Adjusted for tax changes and excluding energy products (CPI-ATE), inflation was 2.7 percent. Underlying inflation has been a little higher than projected. The projections for CPI-ATE inflation from Norges Bank's System for Averaging short-term Models (SAM) are slightly higher than in March.

The Executive Board's assessment of the outlook and balance of risks continues to imply a gradual increase in the policy rate. The uncertainty surrounding global developments persists. In Norway, capacity utilisation appears to be rising broadly as expected, while inflation has been slightly higher than projected. Overall, new information indicates that the outlook for the policy rate for the period ahead is little changed since the March Report.

The Executive Board decided to keep the policy rate unchanged at 1.0 percent. The Executive Board's current assessment of the outlook and balance of risks suggests that the policy rate will most likely be raised in June. The decision was unanimous.

Charts - monetary policy meeting (pdf)