Norges Bank

Rate decision October 2019

Release of the interest rate decision after the meeting of the Executive Board on 23 October 2019.

Policy rate unchanged at 1.50 percent

Norges Bank’s Executive Board has decided to keep the policy rate unchanged at 1.50 percent.

In Monetary Policy Report 3/19, which was published on 19 September 2019, the Executive Board’s assessment was that capacity utilisation in the Norwegian economy was somewhat above a normal level. Underlying inflation was close to the 2 percent inflation target. The policy rate was raised by 0.25 percentage point to 1.50 percent. The Executive Board’s assessment of the outlook and balance of risks suggested that the policy rate would most likely remain at this level in the coming period.

The Executive Board’s assessment is that new information indicates that the policy rate outlook for the coming period is little changed since the September Report. The upturn in the Norwegian economy is continuing broadly in line with expectations in September. Underlying inflation has been as projected. Global uncertainty persists, and interest rates abroad are very low. At the same time, the weak krone may result in higher inflation ahead.

“The Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at the present level in the coming period,” says Governor Øystein Olsen.

 

Rate effective from 25 October 2019:

  • Policy rate: 1.50%
  • Overnight lending rate: 2.50% 
  • Reserve rate: 0.50%

Contact:

Press telephone: +47 21 49 09 30
Email: presse@norges-bank.no

Meeting 23 October 2019

Norges Bank’s Executive Board has decided to keep the policy rate unchanged at 1.50 percent. The Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at the present level in the coming period.

In Monetary Policy Report 3/19, which was published on 19 September 2019, the Executive Board’s assessment was that capacity utilisation in the Norwegian economy was somewhat above a normal level. Underlying inflation was close to the 2 percent inflation target. The policy rate was raised by 0.25 percentage point to 1.50 percent. The Executive Board’s assessment of the outlook and balance of risks suggested that the policy rate would most likely remain at this level in the coming period.

At the meeting on 23 October, new information was assessed against the projections in the September Report.

Growth among Norway’s trading partners appears to be a little weaker than assumed in September. In a number of countries, manufacturing sector developments have been weak, and activity indicators have fallen. Uncertainty surrounding trade tensions persist. The UK’s future relationship with the EU remains unclarified. The UK government has negotiated a revised withdrawal agreement with the EU, but there is uncertainty regarding the process going forward. Trading partners’ forward rates are little changed since September. Oil prices are little changed as well.

Banks have increased their residential mortgage rates after the policy rate was raised in September, but developments in mortgage rates offered by banks indicate that the increase was somewhat less than expected. The premium in the Norwegian money market has been a little lower than projected, while estimated Norwegian forward rates have risen slightly.

The krone, measured by the import-weighted exchange rate index (I-44), has depreciated markedly and is weaker than assumed in September. Persistent uncertainty about global developments may have contributed to keeping the krone weak.

Growth in the Norwegian economy continues to be solid. In the period June-August, mainland GDP rose by 0.7 percent, compared with the previous three-month period. National accounts figures may indicate that growth in the mainland economy could turn out to be a little weaker in Q3 than projected in the September Report. Private consumption has continued to grow moderately, in line with the projections. House price developments have been broadly in line with expectations, while growth in household debt has been a little lower than projected in September. The Government’s proposed central government budget is based on a slight decline in petroleum revenue spending in 2020. The central government budget is a little tighter than assumed in the September Report.

Labour market developments have been approximately as expected. Registered unemployment has changed little in recent months and was 2.2 percent in September. According to the Labour Force Survey (LFS), both employment and labour force participation rates rose in July.

Underlying inflation is close to the inflation target. The 12-month rise in consumer prices adjusted for tax changes and excluding energy products (CPI-ATE) was 2.2 percent in September, in line with the projections in the September Report. The rise in the consumer price index (CPI) was 1.5 percent. Updated projections for the CPI-ATE from the Bank’s System for Averaging short-term Models (SAM) are little changed since September.

The Executive Board’s assessment is that new information indicates that the policy rate outlook for the coming period is little changed since the September Report. The upturn in the Norwegian economy is continuing broadly in line with expectations in September. Underlying inflation has been as projected. Global uncertainty persists, and interest rates abroad are very low. At the same time, the weak krone may result in higher inflation ahead.

The Executive Board decided to keep the policy rate unchanged at 1.50 percent. The Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at the present level in the coming period. The decision was unanimous.

Charts - monetary policy meeting (pdf)

 

Models for short-term forecasting (SAM)

CPI-ATE

Projections by SAM with fan chart, baseline scenario and actual figures. Four-quarter change. Per cent. 

 

Sources: Statistics Norway and Norges Bank

See data table

Mainland GDP

Projections by SAM with fan chart, baseline scenario and actual figures. Four-quarter change. Per cent.
Monthly GDP is not part of the model information set.

 

Sources: Statistics Norway and Norges Bank

See data table