- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 4.5%
Norges Bank’s Monetary Policy and Financial Stability Committee kept the policy rate at 4.5 % at its 26 March meeting, arguing that a still-restrictive stance is required because inflation has surprised on the upside, remains above target and is being fuelled by stronger-than-expected wage growth even as output is close to potential and unemployment low. The rate has been steady at 4.5 % since it was lifted to that level in December 2023. The operating corridor is unchanged, with the overnight lending rate at 5.5 % and the reserve rate at 3.5 % from 28 March 2025. Headline inflation, though well down from its peak, picked up in recent months and is now projected to return to around 2 % only toward end-2028, while growth is expected to recover gradually and registered unemployment to edge up to pre-pandemic levels. The Committee flagged external risks from escalating trade restrictions that could weaken global and domestic demand. Its central forecast points to a cut to 4 % by end-2025 and a gradual decline thereafter, but members stressed that an earlier reduction is possible if inflation and activity surprise on the downside, whereas persistently high wage and price pressures could instead warrant a higher path.
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.