- Decision
- Raise
- Rate change
- 25 bps
- policy rate
- 4.25%
Norges Bank’s Monetary Policy and Financial Stability Committee lifted the policy rate 25 bp to 4.25 %, arguing that inflation remains above the 2 % target and is likely to stay elevated without firmer action. The rate had been held at 4 % since December 2025, following last year’s cumulative 50 bp easing, but the Committee now sees a higher stance as necessary to anchor expectations. March data showed headline CPI at 3.6 % y/y and CPI-ATE at 3.0 %, with wage settlements broadly in line with earlier projections; capacity utilisation is around normal, employment is still rising and registered unemployment is flat, though Labour Force Survey unemployment has edged up. A stronger krone should temper imported inflation, yet elevated oil prices and somewhat stronger external commodity-price pressures linked to the Middle East conflict pose upside risks. The March policy path still envisages a policy rate of 4¼–4½ % by end-2026, and the Committee reiterated that further tightening later in the year may be required if the economy deviates from current 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.