Policy rate kept unchanged at this meeting
Introductory statement by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the press conference following Norway's announcement of the policy rate, Oslo, 13 August 2026.
In a recent monetary policy meeting, Norges Bank decided to maintain the policy rate at 4.25 percent, according to the Monetary Policy and Financial Stability Committee. The bank is responsible for maintaining inflation near a 2 percent target over time, while also promoting employment and economic stability. Despite inflation being above target for several years, the committee expected a tighter monetary policy stance would be required to bring inflation down to target within a reasonable timeframe.
However, inflation has slowed and remained lower than projected this summer. While this is positive news, inflation is still too high, and it is too early to conclude that the inflation outlook has changed significantly. The committee may still need to increase the policy rate in the future. In July, consumer price inflation stood at 3 percent, with excluding tax changes and energy products inflation at 2.7 percent.
Inflation remains notably above the target. One reason for the persistent inflation is the substantial rise in firms' labor costs. As these wage increases wane, they are likely to continue contributing to elevated inflation levels. Geopolitical tensions in the Middle East raise uncertainty about the inflation outlook. The Strait of Hormuz remains congested, and oil price volatility has been significant throughout the summer.
Oil prices have remained stable since June, while gas prices have increased slightly. Overall, the effects of external price pressures on imported Norwegian goods have been as expected. The Norwegian krone weakened earlier this summer but has since slightly appreciated and is now generally aligned with the June assumptions. Unemployment rates have remained relatively stable throughout the summer, with private consumption increasing and residential construction remaining low.
House prices fell in July and are lower than expected. To avoid restricting the economy excessively while maintaining high inflation as a long-term risk, the committee believes a restrictive monetary policy stance is still necessary to bring inflation down to the 2 percent target within a reasonable timeframe. The path of future policy rate adjustments will depend on evolving economic conditions.
Written by urgent.news from BIS Central Bank Speeches's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
