Norway is getting back to work as it leaves the oil crash behind.
Stoked by higher economic optimism, the labor force will now expand as a cyclical trough is marked in the declining participation rate, according to analysts at Svenska Handelsbanken.
Central bank Governor Oystein Olsen said earlier this month that the output gap is closing as he raised the probability for a rate hike toward the end of 2018. The unemployment rate is now falling in line with the latest central bank forecast in December as a tighter labor market is expected to put pressure on wages and revive inflation. But that will take time. The central bank doesn’t expect inflation to pick up to 2 percent until 2020 and underlying consumer price growth is now 1.5 percentage point below target.
Norges Bank will hold its next rate decision on Jan. 25, when it sits for an intermediary meeting without a monetary policy report.