Guidance Broadly Unchanged vs December

The Norges Bank raised the policy rate to 4.50% as unanimously expected, and noted that the policy rate would likely be held at current levels for "some time ahead". Governor Bache's guidance quote notes that "the Committee assesses that the policy rate is now sufficiently high to return inflation to target within a reasonable time horizon".

We note that the guidance paragraph citing two-way risks appears unchanged compared to the December statement:

"There is uncertainty about future developments in the Norwegian economy. If cost inflation remains elevated, or the krone depreciates again, inflation may remain high for longer than previously projected. In that case, the Committee is prepared to raise the policy rate again. If there is a more pronounced slowdown in the Norwegian economy or inflation declines more rapidly, the policy rate may be lowered earlier than envisaged in December".

The other key notes from the policy statement are:

• "The overall prospects for the Norwegian economy do not appear to have changed materially since the previous Report".
• "Further out, when inflation falls back and economic conditions so warrant, the Committee can start lowering the policy rate".