Executive Board's assessment
Meeting 25 October 2017
Norges Bank's Executive Board has decided to keep the key policy rate unchanged at 0.5 percent.
In Monetary Policy Report 3/17, published on 21 September, the Executive Board's assessment was that there was a continued need for an expansionary monetary policy. Capacity utilisation in the Norwegian economy was assessed to be below a normal level, and inflation was expected to remain below 2.5 percent over the coming years. The Executive Board's assessment of the outlook and the balance of risks suggested that the key policy rate would remain at 0.5 percent in the period ahead.
At the Executive Board's meeting of 25 October, new information was assessed against the projections in the September Report.
Among Norway's trading partners, growth appears to be slightly higher than expected while inflation has been approximately in line with expectations. Trading partners' forward rates have risen slightly. The Norwegian money market premium is approximately in line with assumptions.
There is little new information about growth in the Norwegian economy. Goods consumption has been slightly weaker than assumed, but consumer confidence is still at a high level. House prices have fallen somewhat more than expected. Oil prices have moved up a little since September, but futures prices are little changed. The krone exchange rate, as measured by the import-weighted exchange rate index (I-44), is somewhat weaker than expected. The fiscal policy stance in the Government's draft budget for 2018 is approximately in line with the assumptions in the September Report.
Labour market developments have been as assumed. Registered unemployment remained unchanged at 2.6 percent between August and September. LFS unemployment edged down in July, while employment increased somewhat.
The year-on-year rise in consumer prices adjusted for tax changes and excluding energy products (CPI-ATE) rose to 1.0 percent in September. This is slightly lower than projected.
The Executive Board's assessment is that developments so far have been broadly in line with the picture presented in the September Report New information does not provide a basis for changing the Bank's assessment of growth in the Norwegian economy. The improvement in the labour market appears to be continuing. Inflation has been slightly lower than projected, while the krone exchange rate is somewhat weaker than projected.
Overall, the outlook and the balance of risks for the Norwegian economy do not appear to have changed substantially since the September Report. The Executive Board has decided to keep the key policy rate unchanged at 0.5 percent. The decision was unanimous.