OSLO: Norwegian central bank interest rates should remain at low levels despite signs the economy is recovering from a slump in oil prices, the country's key export, the International Monetary Fund (IMF) said on Wednesday.
Norway's mainland economy, which excludes oil output but includes indirect effects from the sector's cyclical swings, grew by just 0.9 percent in 2016, a seven-year low.
The IMF reiterated projections, first made in May, that mainland GDP will grow by 1.75 percent in the current year and by 2.25 percent in 2018.
"Monetary policy should stay accommodative. Given the slack in the economy and weakened inflation outlook, maintaining an accommodative monetary policy stance is appropriate pending a durable recovery," IMF said in its annual review of Norway.
"Further easing could be considered in the event of significant downside surprise on growth and inflation," it added.
The Norwegian central bank last month kept its key policy interest rate unchanged at a record low 0.5 percent, but removed an easing bias that had said rates were more likely to fall than they were to rise in the short term.
The central bank simultaneously raised its mainland growth forecast for the current year to 2.0 percent from 1.6 percent seen in March, but cut its 2018 prediction to 1.9 percent from 2.0 percent.
In May, the finance ministry predicted the mainland economy would grow by 1.6 percent in 2017 and 2.4 percent next year.
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