- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 4%
Norges Bank’s Monetary and Financial Stability Committee kept the policy rate at 4.0 %, judging that restrictive settings remain necessary as headline inflation stays above the 2 % target, underlying inflation hovers near 3 %, and unemployment has ticked up while resource utilisation has returned to normal. After cutting the rate by a cumulative 50 bp from 4.5 % in June to 4.0 % in September, the committee sees the monetary-policy outlook broadly unchanged since September. It held the overnight lending and reserve rates at 5.0 % and 3.0 %, maintaining the current corridor. A weaker krone since the September Report is adding to inflation pressures, even as a modest rise in unemployment suggests slightly more spare capacity. The bank cited heightened global trade and geopolitical uncertainties as key external risks. Its updated path still implies one to two cuts in 2026 and a gradual decline in the policy rate to a little above 3 % by end-2028, with members stressing they are in no rush to ease and could adjust the trajectory if inflation or labour-market trends deviate from projections.
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.