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Chart: Policy rate kept unchanged

The Monetary Policy and Financial Stability Committee has decided to keep the policy rate unchanged at 4.5 percent.

Norges Bank is tasked with keeping inflation close to 2 percent over time. We are also mandated to help keep employment as high as possible and to promote economic stability.

Unemployment is currently neither especially high nor unusually low. But inflation is too high. It will likely be necessary to keep the policy rate elevated for a time, and we are prepared to raise the policy rate if needed to bring inflation down to target within a reasonable time horizon.

Let me say a bit more about the background for the decision and the Committee’s assessments.

Chart: Inflation is above target

Inflation has been above target for several years, and at the monetary policy meeting in September we raised the policy rate. Our assessment was that it would likely be necessary to keep the policy rate elevated for a time. Since then, we have not received information indicating that the outlook for the Norwegian economy has changed materially.

According to the latest figures, consumer price inflation was 3.4 percent. Adjusted for tax changes and excluding energy products, inflation was 3.0 percent. Prices for domestically produced goods and services are rising fastest.

High labour cost growth in recent years will likely contribute to keeping inflation elevated ahead. At the same time, energy prices are still high owing in part to the conflicts in the Middle East. Since September oil spot prices have fallen, while futures prices for oil, gas and electricity have moved up. On the other hand, the krone exchange rate has appreciated. A stronger krone will in isolation dampen inflation.

High energy prices have also pushed up inflation internationally. Since summer, several central banks have raised their policy rates, and more rate hikes are expected going forward. Long-term interest rates rose markedly earlier this autumn but have fallen back somewhat in recent weeks.

Chart: Little change in unemployment in recent months

Unemployment has shown little change since our previous monetary policy meeting. According to the latest figures, the unemployment rate is 2.0 percent. At the same time, employment appears to have risen further.  

Chart: The Committee is prepared to raise the policy rate further

The Committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon. High inflation over time can make inflation stickier and harder to bring down again. In the current situation, where inflation has long remained above target, we are therefore particularly vigilant to signs of continued elevated price pressures.  

The future path of the policy rate will depend on how the economy evolves. We will have received more information ahead of the next monetary policy meeting in December, when we will also present new forecasts.