"Based on the Committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in December", says Governor Øystein Olsen.

In Monetary Policy Report 3/21, which was published on 23 September, the policy rate forecast indicated that the policy rate would be raised gradually ahead.

The reopening of society has led to a marked upswing in the Norwegian economy, and activity is higher than its pre-pandemic level. The economic upturn is continuing broadly as expected. Unemployment has fallen further. Higher electricity prices have resulted in high consumer price inflation, but underlying inflation is lower than the inflation target. Looking ahead, higher economic activity and rising wage growth will likely lift underlying inflation, but the recent krone appreciation could curb the rise in prices.

There is still uncertainty as to the evolution of the pandemic and its impact on the Norwegian economy. Infection rates have risen again recently, but a high vaccination rate will likely limit the need for new pandemic-related restrictions. The Committee also noted that global supply chain disruptions could dampen the economic upturn and also contribute to higher inflation in Norway.

Based on the Committee’s assessment, a normalising economy suggests that it will be appropriate to raise the policy rate further from today’s level. Uncertainty surrounding the effects of higher interest rates warrants a gradual rise in the policy rate.