- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 4.5%
Norges Bank’s Monetary Policy and Financial Stability Committee held the policy rate at 4.5%, judging inflation still too high despite slightly below-normal capacity utilisation. The decision follows quarter-point increases in May and September from 4%. The overnight lending and reserve rates remain at 5.5% and 3.5%, respectively. September consumer price inflation was 3.4%, above the 2% target, while domestically produced goods and services inflation exceeded projections. The Committee expects past increases in business costs to keep inflation elevated. The economic outlook was little changed since September, with registered unemployment broadly stable and slightly lower than projected. The krone appreciated and was stronger than assumed. Middle East conflicts continued to create substantial uncertainty about inflation, while gas and electricity prices rose and oil spot prices fell. The Committee signalled that the policy rate would likely need to remain elevated for a time and said it was prepared to raise it if warranted by the inflation outlook, while seeking to avoid restraining the economy more than necessary.
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. On 4 November, it held the policy rate at 4.50%, judging that restrictive policy remained necessary because inflation was markedly above target and rapid business cost increases in recent years would likely sustain price pressures, and reiterated that the rate would likely need to remain elevated for a time, with further increases possible if warranted by the inflation outlook.