“The Committee’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at today’s level for some time ahead”, says Governor Øystein Olsen.

In Monetary Policy Report 4/20, which was published on 17 December, the policy rate forecast implied a rate at the current level for over a year ahead, followed by a gradual rise.

Economic developments have so far been broadly in line with the projections in the December Report. After rising for several months, activity in the Norwegian economy fell again towards the end of 2020. House prices have risen further. The recovery is now being held back by higher infection rates and stricter containment measures. At the same time, vaccination is well under way, and economic growth is expected to pick up further out in 2021.

Underlying inflation is above the target, but the krone appreciation since March and prospects for low wage growth suggest that it will moderate ahead.

In the Committee’s assessment, the sharp economic downturn and considerable uncertainty surrounding the outlook suggest keeping the policy rate on hold until there are clear signs that economic conditions are normalising.