Norges Bank Watch 2015: An Independent Evaluation of Monetary Policy in Norway

Abstract

In 2014, like the year before, Norges Bank’s Executive Board held six monetary policy meetings where it decided key policy interest rates. The policy rate was changed in December only, but interest rate forecasts were changed considerably over the meetings. Our report is organized as follows.

In chapter 3 we give a brief description of some key economic variables that are important for the monetary policy decisions.

In chapter 4 we describe each meeting in more detail and evaluate the Board’s assessments. The decision to cut rates in December stands out as the most obvious decision to assess. Norges Bank lowered rates to be proactive after the drop in oil prices, and placed less emphasis on the risk of increasing financial imbalances. We are not totally convinced that proactivity was required here and believe that the financial stability concerns are real.

In Chapter 5 we address various issues. We discuss monetary policy and financial stability, and Norges Banks communication in relation to the interest rate account and robustness criterion for monetary policy. We agree with previous Norges Bank Watch committees and recommend publishing minutes shortly after the meeting. We also discuss briefly Norges Bank’s purchases of NOK and recommend that Norges Bank provide more information.