(Finance) – The Committee for Monetary Policy and Financial Stability of Norges Bankthe Norwegian central bank, has decided to keep the reference rate unchanged at 4.5% at the May meeting. “Based on the Committee’s current assessment of the outlook, the policy rate will likely be maintained at today’s level for some time to come,” explained Governor Ida Wolden Bache.
The Committee assesses that the policy rate is sufficiently high to bring inflation back to target within a reasonable time horizon. Monetary policy is having a restrictive effect and growth in the Norwegian economy is low. L’Price inflation is slowing but is still well above target. Business costs have risen sharply in recent years, while high wage growth and a weakening krona help keep inflation high.
Since the March report, inflation has been slightly lower than expected. On the other hand, economic activity is slightly higher than expected and wage growth may turn out to be slightly higher than expected. At the same time, the Interest rate expectations abroad have risen and the krona is a little weaker than expected. The Committee will have received more information on economic developments ahead of the next monetary policy meeting in June, when the new forecasts will be presented.
“The data so far may suggest that a restrictive monetary policy may be necessary for a somewhat longer period than previously expected”, is underlined in the statement.
The economic prospects are uncertain. If a further increase in the policy rate is deemed necessary to bring inflation back to the target level within a reasonable time horizon, the Committee stands ready to increase the policy rate again. If there is a more pronounced slowdown in the Norwegian economy or the outlook suggests that inflation will return to the target level faster, the policy rate could be lowered earlier than expected in March.
(Photo: Max van den Oetelaar on Unsplash)