- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 4.5%
Norges Bank’s Monetary Policy and Financial Stability Committee left the policy rate unchanged at 4.5 percent at its 22 January meeting, judging that restrictive settings remain necessary to anchor inflation near target even as price pressures ease and activity cools. Underlying consumer price inflation and unemployment have evolved broadly in line with projections, while headline inflation has undershot, and the rate hikes delivered since autumn 2021 have led to a gradual rise in joblessness from low levels. The Committee noted that fewer policy rate cuts are now expected abroad and flagged uncertainty over the impact of potential increases in global trade barriers, which could restrain world growth with unclear implications for Norwegian prices. Signalling an imminent pivot, Governor Ida Wolden Bache said the policy rate will likely be reduced at the March decision, when updated forecasts are released alongside Monetary Policy Report 1/25.
Rate evolution
Over the period, Norges Bank first cut the policy rate from 4.50% to 4.00% in mid-2025, then paused before raising it to 4.25% in May 2026, holding it in June and August and returning it to 4.50% in September. The initial easing reflected slowing inflation, including lower inflation excluding energy prices, and higher unemployment pointing to more spare capacity, while through late 2025 Norges Bank kept policy restrictive as inflation remained above target, growth appeared firmer than assumed and krone depreciation lifted inflation prospects amid trade and geopolitical uncertainty.
By May 2026, unexpectedly high inflation, stronger wage growth prospects and external price pressures linked to the war in the Middle East had shifted guidance from cuts to tightening and then a rate increase, while on 18 June Norges Bank held the policy rate at 4.25%, citing consumer price inflation of 3.1%, higher imported goods inflation and stronger wage and external price pressures, and signalled a likely increase at one of the forthcoming meetings. On 12 August, it again held the rate at 4.25% after inflation slowed more than projected, with July 12-month consumer price inflation at 3.0% and inflation adjusted for tax changes and excluding energy products at 2.7%, judging that policy should remain restrictive because inflation was still markedly above target and rapid business cost growth would keep it elevated, even as capacity utilisation appeared close to normal but was drifting down.
On 23 September, Norges Bank raised the policy rate from 4.25% to 4.50%, judging that a somewhat tighter stance was needed to return inflation to target within a reasonable time horizon as inflation remained markedly above target and the outlook further ahead had not changed materially despite lower-than-projected underlying inflation and capacity utilisation slightly below normal. It said the policy rate would likely need to remain elevated for a time and signalled that further increases were possible if warranted by the inflation outlook.