In our weekly Top Down Outlook we pubblished over the week end we have analysed the outlook for the Norges Bank monetary policy meeting. The Norges Bank was the first European Central Bank to reverse the expansionary monetary policy pursued since the crisis erupted in 2007. On October 28 the Norwegian CB hiked rates by 25bp to 1.5% as economic activity picked up more rapidly than previously expected, driven by the implementation of several monetary policy measures (rates were slashed from 5.75% to 1.25% in less than 9 months), larger fiscal stimulus packages and investments in petroleum. In the statement released after the meeting, the Norges Bank predicted a 0.25% rate increase to 1.75% in the period to the publication of the Next Monetary Policy Report (March 24, 2010). Although we do not see any urgency for the CB to raise rates given the encouraging international environment, we do not exclude the possibility that the Norges Bank will decide to tighten rates again in December, in line with the indications of our estimated equilibrium model based on the Norges Bank’s estimated equilibrium model. Indeed, underlying inflation is higher than the economic weakness anticipated and slackness in economic activity is low. Looking ahead, we expect the Norges Bank to continue to tighten rates in 2010 as economic activity is likely to be stronger in Norway than in other major international economies. Indeed, a global recovery will likely push up oil prices, with positive effects on the country’s economy. Moreover, should other major central banks set upon a tightening path, this could boost the Norwegian Key Rate as the external money market rate is a key variable for the NB’s equilibrium model. Only a sharp appreciation of the Norwegian Krone could prompt the NB into loosening its policy.