Norway’s central bank raises policy rate to 4.50%

Norway's central bank, Norges Bank, raised its policy rate to 4.50% on Monday, down from 4.25%, in a bid to combat inflation and reach its 2% target. The Monetary Policy and Financial Stability Committee deemed tighter monetary policy necessary to bring inflation back to target within a reasonable timeframe. With inflation remaining above target for several years, the bank's move aims to reduce inflation.

Governor Ida Wolden Bache stated that the policy rate increase will likely need to stay high for some time and could be raised further if required. Inflation moderated over the summer compared to projections, with underlying inflation (measured by CPI-ATE) slowing and falling below expectations. However, the ongoing Middle East conflict continues to create uncertainty about the inflation outlook due to rising prices for oil, gas, and commodities.

Despite increased mainland economic activity, employment has shown little change in recent months. The bank warns that sustained high inflation could make it harder for households and firms to plan, as persistently high inflation could become more entrenched. The policy rate is anticipated to remain near the current level for a period before slightly declining. Inflation is projected to ease from next year and reach the 2% target in 2029.