- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 4%
Norway’s Norges Bank kept its policy rate unchanged at 4.0 percent, judging that unexpectedly high inflation, stronger‐than-projected wage growth and still-tight capacity utilisation require a continued restrictive stance and likely warrant a rate increase “at one of the forthcoming monetary policy meetings” to safeguard the 2 percent inflation target. The decision follows two 25 bp reductions between June and September 2025 that lowered the rate from 4.5 percent to the current level. The Committee noted that the krone has appreciated markedly, which should temper imported inflation, but headline price growth has recently exceeded forecasts and energy and wage developments risk entrenching inflation expectations. Capacity utilisation remains close to normal, unemployment is slightly below December projections, and Regional Network contacts report marginally easier recruitment conditions; the Bank still expects registered joblessness to drift back to pre-pandemic levels. Externally, the Middle East war has driven sharp rises in oil and gas prices, weaker global equity markets and higher domestic and foreign yields, developments seen as inflationary and growth-dampening. The policy-rate path has been revised up, pointing to 4.25–4.5 percent by end-2026, and the Committee stressed that if price pressures persist a higher rate may be needed, while weaker labour markets or faster disinflation could lead to a lower 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.