Policy rate kept unchanged at 4.25%

Press release

Norges Bank’s Monetary Policy and Financial Stability Committee decided to keep the policy rate unchanged at 4.25% at its meeting on 12 August.

“Inflation has slowed and been lower than projected this summer. Slower inflation is welcome news, but inflation is still too high, and it is too early to conclude that the inflation outlook has changed materially. It may thus still become necessary to raise the policy rate”, says Governor Ida Wolden Bache.

Inflation has been above target for several years. Capacity utilisation in the Norwegian economy appears to be close to a normal level but is drifting down. At the monetary policy meeting in June, the Committee’s assessment was that it would likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings. Since June, the Committee has noted the following:

Inflation has slowed and been lower than projected. In July, 12-month CPI inflation was 3.0%, and CPI inflation adjusted for tax changes and excluding energy products (CPI-ATE) was 2.7%. The conflict in the Middle East is still creating uncertainty about the inflation outlook. Oil spot and futures prices have shown little change since June, while gas prices have risen somewhat. External price impulses to Norwegian imported goods overall appear to have evolved broadly as expected. The krone weakened earlier this summer but has since appreciated a little again and is now broadly in line with that assumed in June.

Capacity utilisation in the economy appears to have evolved broadly in line with projections. Both registered unemployment and LFS unemployment have changed little in recent months. Prices in the secondary housing market fell markedly in July, and construction activity remains low.

The Committee judges that a restrictive monetary policy stance is still needed to bring inflation down to target within a reasonable time horizon. The Committee does not want to restrict the economy more than needed. At the same time, inflation is still markedly above target, and the rapid rise in business costs in recent years will contribute to keeping inflation elevated ahead. High inflation over time can lead households and firms to begin planning for persistently high inflation. Inflation may then become stickier and harder to bring down again.

The future path of the policy rate will depend on economic developments. Inflation has been lower than projected, but it is too early to conclude that the inflation outlook has changed materially since June. New forecasts will be presented at the monetary policy meeting in September.

New forecasts were not prepared for this meeting. Monetary Policy Report 3/26 will be published together with the policy rate decision on 24 September 2026.

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