In the annual Schweigaard Lecture, Norges Bank Governor Ida Wolden Bache said a policy rate increase may still be necessary even though inflation fell during the summer and was lower than the bank had expected. Inflation remains clearly above the 2% target, and Norges Bank still sees a need for restrictive monetary policy to return it to target within a reasonable time. The June forecast indicated an increase in the policy rate from 4.25% to just over 4.5% by the end of 2026, with a rise envisaged at one of the coming policy meetings. Bache defended flexible inflation targeting as the appropriate framework for balancing price stability and employment, while arguing that interest rates should not be used to promote the green transition. She also reaffirmed Norges Bank’s commitment to explaining its decisions and publishing a policy rate forecast, with no concrete communication changes planned. Norges Bank will publish new forecasts in about one month. Bache said easing would probably become appropriate once inflation is moving toward target, but the bank does not expect rates to fall substantially.
2026-08-24Norges Bank
Norges Bank governor says rate increase may still be needed despite lower inflation
Norges Bank Governor Ida Wolden Bache said a policy rate increase may still be needed because inflation remains clearly above the 2% target despite a weaker-than-expected summer reading. New forecasts are due in about one month, while the bank expects only limited rate reductions once inflation moves toward target.