Norges Bank

The Executive Board's assessment

Meeting 11 May 2016

Growth in the world economy is moderate. Growth among Norway's trading partners as a whole appears to be broadly as projected in the March 2016 Monetary Policy Report. Inflation is still low in most advanced economies, with overall price developments abroad approximately in line with projections. Expected policy rates among trading partners have fallen slightly.

Oil prices have risen somewhat since March. Futures prices are slightly higher than envisaged in the March Report, reflecting expectations of a very gradual rise in oil prices.

The krone has appreciated and is stronger than envisaged in March. The appreciation is related to the rise in oil prices.

After the key policy rate was lowered in March, banks have reduced lending rates, but the reduction has been less pronounced than expected. Norwegian money market premiums are somewhat higher than anticipated in the March Report.

Labour market developments have been slightly stronger than expected. Registered unemployment has remained broadly unchanged in recent months and is somewhat lower than projected. LFS unemployment is in line with projections in the March Report.

There is little new information regarding growth in the Norwegian economy. In a phone survey of enterprises in Norges Bank's regional network, contacts generally reported that developments and prospects are little changed compared with expectations earlier this year.

House price inflation has been higher than projected, with continued wide regional dispersion. Household credit growth has been approximately in line with expectations.

The social partners in the manufacturing sector (the sector that sets the norm for wage increases in Norway) estimate wage growth in 2016 of 2.4 percent. In other wage settlements, agreement has been reached in line with the wage norm set by the manufacturing sector. While a number of wage settlements have yet to be finalised, developments so far indicate that overall wage growth in 2016 may be slightly lower than projected in the March Report.

Inflation has been broadly as projected in the March Report. The year-on-year rise in consumer prices adjusted for tax changes and excluding energy products (CPI-ATE) was 3.3 percent in April.

The key policy rate is set with a view to stabilising inflation at close to 2.5 percent in the medium term. At its meeting on 16 March, the Executive Board decided to reduce the key policy rate by 0.25 percentage point to 0.50 percent. At the same time, the Executive Board indicated that the key policy rate may be reduced further in the course of the year.

On the whole, developments since March have not deviated substantially from the projections in the March Report. Inflation remains elevated, but a stronger krone may contribute to a slightly more rapid decrease in inflation than projected in March. On the other hand, the rise in oil prices may reduce uncertainty and contribute to somewhat higher growth in the Norwegian economy. An overall assessment of new information indicates that the key policy rate should be kept unchanged at this meeting.


The key policy rate is kept unchanged at 0.50 percent.

Published 12 May 2016 10:00