Policy rate raised to 1.25 percent
Norges Bank's Executive Board has decided to raise the policy rate by 0.25 percentage point to 1.25 percent.
Growth in the Norwegian economy is solid, and capacity utilisation is estimated to be somewhat above a normal level. Underlying inflation is a little higher than the inflation target. At the same time, trade tensions are a source of substantial global uncertainty. Uncertainty surrounding the effects of monetary policy suggests a cautious approach to interest rate setting. The overall outlook and balance of risk suggest that the policy rate be increased somewhat further.
The upturn in the Norwegian economy appears to be a little stronger the coming year than projected earlier. On the other hand, there are prospects for weaker external growth and lower foreign interest rates. The policy rate forecast indicates a slightly faster rate rise in the coming year than projected in the March Report, but the policy rate path is little changed further out. With a policy rate in line with the forecast, inflation is projected to remain close to the inflation target in the years ahead, at the same time as unemployment remains low. The policy rate path will be adjusted in response to a change in economic prospects.
“Our current assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased further in the course of 2019”, says Governor Øystein Olsen.
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