- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 4.25%
On 18 June 2026, Norges Bank’s Monetary Policy and Financial Stability Committee left the policy rate unchanged at 4.25 percent, saying inflation remains too high and new information indicates slightly stronger inflation pressures than previously anticipated, meaning a somewhat tighter monetary policy stance will likely be needed and, if developments turn out as currently envisaged, the rate will be raised at one of the forthcoming monetary policy meetings. Consumer price inflation was 3.1 percent against the central bank’s 2 percent target, imported goods inflation has edged higher in recent months, labour costs have risen substantially, and the policy rate forecast published with the decision is a little higher than in March and stands just above 4.5 percent at the end of the year, with inflation projected to return to target in 2029. Capacity utilisation appears close to a normal level but is drifting down, and Norges Bank said a higher policy rate would cool the economy further and raise registered unemployment to slightly above pre-pandemic levels. The krone appreciated over spring but has weakened again in recent weeks and is now broadly in line with the March assumptions, while external price impulses to Norwegian imports appear slightly stronger than expected. Norges Bank said the conflict in the Middle East and developments around the Strait of Hormuz continue to create substantial uncertainty for the outlook, though a recent United States-Iran memorandum of understanding that provides for the opening of the strait could weaken external price pressures if energy and commodity prices fall quickly; if inflation proves higher than projected the policy rate may become higher than currently envisaged, while a sharper cooling in the economy or faster easing in inflation pressures could imply 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.