(Adds economists, detail, background)
OSLO, Sept 13 Norway's economic outlook has
improved in the last three months and is expected to continue to
do so in the next six, the central bank said on Tuesday, all but
eliminating the possibility of an interest rate cut next week.
At its last rate meeting on June 23, the bank had said there
was a "full probability" of a rate cut this month. But recent
data including higher-than-expected inflation and a boom in
house prices has brought prospects of no change in rates into
"Prospects have been adjusted upward since the previous
survey, and contacts expect moderate output growth over the next
six months," the bank said in a regional network survey of 329
The report, which is compiled quarterly, is the central
bank's primary sentiment gauge and usually forms the backbone of
its rate decisions and forecasts.
The bank meets on Sept 21 and will publish its policy
decision the following day.
"Expectations that the decline in activity in the oil
industry will moderate are contributing to the improved
prospects," it said, also citing expectations of a further
pick-up in demand from the public sector.
Economists said the report showed the downturn in the
Norwegian economy was probably over.
"It is almost unthinkable to cut rates now," said Harald
Magnus Andreassen, chief economist at Swedbank. "We expected the
(survey's) third quarter to be better than the second quarter
and we are still surprised. It is much better than expected."
The Norwegian crown strengthened against the euro after the
survey was published, trading at 9.2315 at 0843 GMT against
9.2680 at 0756 GMT.
"Growth in Norway is stronger than we thought and growth in
the second half is expected to be stronger than Norges Bank
expected in June," said Frank Jullum, chief economist at Danske
Norway's mainland GDP, which excludes the volatile oil and
shipping sectors, grew 0.4 percent in the second quarter,
according to Statistics Norway. The central bank said in June it
expected the mainland economy to grow 0.8 percent in 2016.
"We no longer believe there will be a rate cut," said
Jullum. "Now growth is so strong that there is no longer a need
to stimulate even more."
(Reporting by Ole Petter Skonnord, Terje Solsvik, Camilla
Knudsen and Joachim Dagenborg, writing by Gwladys Fouche;
editing by John Stonestreet)