The Executive Board’s assessment
Meeting 26 October 2016
Economic growth for Norway's trading partners has been broadly in line with the projections in the September 2016 Monetary Policy Report. Inflation abroad is still low and approximately as expected. Overall, expected policy rates among trading partners are slightly higher than in September.
Spot prices for oil have risen somewhat more than assumed in September and have recently traded at around USD 50 per barrel. Futures prices have also risen slightly, but still reflect expectations of a very gradual increase in oil prices.
The krone has appreciated and is stronger than projected in September, partly reflecting the rise in oil prices.
The premium in the Norwegian money market has so far been somewhat higher than projected for the current quarter, but is expected to decrease in the period to the turn of the year. Bank lending rates are little changed.
Overall capacity utilisation in the Norwegian economy appears to be broadly in line with projections. Registered unemployment has edged down, while unemployment measured by the Labour Force Survey has risen. A telephone survey of firms in Norges Bank's regional network confirms that prospects have improved over the past half year.
The Government's budget proposal for 2017 implies a structural non-oil deficit of NOK 226 billion in 2017. Measured as a share of trend mainland GDP, the structural non-oil deficit is estimated to increase by 0.4 percentage point. Oil revenue spending is slightly lower than assumed in the September 2016 Monetary Policy Report.
House price inflation is still high. House prices rose slightly more in September than expected in the September Report. There are wide regional differences in the housing market. Household debt growth has risen somewhat. According to the banks in Norges Bank's lending survey, household credit demand rose slightly in the third quarter.
Consumer price inflation has varied widely in recent months. The year-on-year rise in consumer prices adjusted for tax changes and excluding energy products (CPI-ATE) slowed to 2.9 percent in September, primarily reflecting the slower rise in prices for imported consumer goods. Consumer price inflation has been lower than expected.
At its meeting on 21 September, the Executive Board decided to keep the key policy rate unchanged at 0.50 percent. The Executive Board also indicated that the key policy rate would most likely remain at that level in the period ahead. Overall, developments since September do not differ substantially from the projections in the September Monetary Policy Report. This implies that the key policy rate remains unchanged at this meeting.
The key policy rate is kept unchanged at 0.50 percent.