CPI inflation moved up to 2.8 per cent in December, partly reflecting high electricity prices. Other inflation measures ranged between 1¾ and 2½ per cent, which was also higher than expected. Because many businesses normally change selling prices at the beginning of the year, price developments in January and February will provide a better indication of the rate of increase in prices. Employment has increased markedly and faster than expected. Private consumption has also been higher than projected.

On the other hand, weaker growth among our trading partners will normally have an adverse impact on the Norwegian economy. In particular, developments in the US have been weaker than expected and the US Federal Reserve has reduced its key rate markedly. There has been a considerable downward shift in global interest rate expectations in recent weeks. The growth outlook for the world economy has weakened and equity prices have declined. House prices have fallen in several countries, including Norway.  

- Inflation picked up faster than expected in December and growth in the Norwegian economy is strong, but in view of the weak developments in the external environment and the turbulence in financial markets, it is now on balance appropriate to leave the key policy rate unchanged, says Deputy Governor Jarle Bergo.

For more information, see "The Executive Board’s monetary policy decision - background and general assessment". 

Charts and background material