Country Economic Forecasts > Norway

The Norges Bank reduced the policy interest rate by 0.25% to its lowest ever level of 0.5% in March. Although it cited no single cause, the move appears to have been partially motivated by downward revisions to GDP growth in 2015, which in turn lowered the central banks growth forecasts for this year. With oil prices remaining weak and unemployment continuing to edge higher, we now expect a further rate cut of 0.25% later this year somewhat at odds with the Banks previous desire to approach further policy loosening with caution due to the uncertain consequences of very low interest rates. However, the rate cuts do little to change our view on the growth outlook, with low oil prices continuing to weigh heavily on both oil production, output in related industries and spilling over into the broader economy. We see growth of just 0.5% this year, rising to a still modest 1.5% in 2017.