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Norges Bank raised its policy rate by 0.25 percentage point to 4.5% on Sept. 24, saying an elevated rate will likely be needed for a time to bring inflation down. The bank projects inflation will reach its 2% target in 2029, while acknowledging uncertainty around energy prices, wages and the economic outlook.
Norges Bank raised its policy rate by 0.25 percentage point to 4.5% on Sept. 24, as the central bank seeks to bring inflation back toward its 2% target. Governor Ida Wolden Bache said the committee expects rates to remain elevated for a time and is prepared to raise them further if needed.
Figures released earlier in September showed consumer price inflation at 3.3%. An underlying measure that adjusts for tax changes and excludes energy products was 3.0%. Both readings were above the central bank’s target. Norges Bank said inflation had been above target for several years, raising concern that it could become more persistent and harder to reduce.
The committee’s June projections had already indicated that a rate increase might be needed at one of the coming meetings. Underlying inflation moderated over the summer and came in lower than expected, but the bank said the outlook further ahead had not materially changed. Its new forecast keeps the policy rate close to 4.5% for a period before it declines somewhat; the rate is expected to stay elevated longer than indicated in June.
Norges Bank projects inflation will slow from next year and reach 2% in 2029. It expects the economy to cool further and registered unemployment to edge above pre-pandemic levels. The bank said wage growth is expected to be lower in 2026 than in 2025 and to slow further in subsequent years. It also expects household purchasing power to strengthen as inflation falls, including after interest expenses are counted.
Higher Rates Shape Norway’s Outlook
The increase raises borrowing costs for households and businesses as the central bank tries to restrain price growth. The rate decision also signals that policymakers consider inflation risks significant enough to keep monetary conditions tight, even though underlying inflation eased over the summer. For borrowers with loans tied to market rates, the policy rate can influence the interest they pay; the timing and size of any pass-through depend on lenders and loan terms.
The committee also has a mandate to support high employment and promote economic stability. It said the Norwegian economy had gradually cooled, while businesses in its Regional Network reported that recruitment had become easier. Yet registered unemployment remained little changed over the past year: 2.1% of the labour force was fully unemployed in August, matching the bank’s projection. The bank’s forecast presents a trade-off: inflation is expected to fall without a marked increase in unemployment, but the outlook is uncertain.
Developments abroad add another channel of influence. Rising international energy and commodity prices have contributed to higher inflation elsewhere, and market interest rates have climbed since June. Higher rates in other economies can put pressure on Norwegian rates partly through their effect on the krone. Norges Bank must weigh those external forces alongside domestic inflation and employment when setting policy.
Inflation, Costs and the Krone
Norges Bank is responsible for keeping inflation close to 2% over time, while also supporting employment and economic stability. The September increase followed a period in which inflation had remained above target for several years. In June, the committee judged that an increase was likely to be needed at one of its forthcoming meetings, though it did not raise the rate immediately at that point.
The bank cited competing pressures on the outlook. Rapid growth in firms’ labour costs in recent years is expected to keep inflation elevated. The ongoing conflict in the Middle East creates uncertainty, while oil, gas and other commodity prices have risen since June. Higher input costs can feed into prices charged by domestic businesses and the cost of imported consumer goods. In the other direction, the krone has strengthened so far this year and is now stronger than the bank assumed in June; the bank said that, on its own, this would lower inflation.
International policy has also shifted. Norges Bank said US and euro-area policy rates had been raised in recent weeks and further increases were expected in those economies and elsewhere. Long-term interest rates had also risen. The bank presented these developments as relevant to Norway’s rate outlook, not as a guarantee of any particular future decision.
“It will likely be necessary to keep the policy rate elevated for a time.”
— Ida Wolden Bache, Governor of Norges Bank
Risks Around the Inflation Forecast
The central bank described the economic outlook and future interest rates as uncertain. It did not specify how long the policy rate will remain near its current level, or whether the committee will raise it again. Those decisions will depend on how inflation and the wider economy develop.
Several factors could shift the outlook, including energy and commodity prices, the effects of the Middle East conflict, firms’ labour costs and the krone’s exchange rate. The bank’s projections are forecasts, not confirmed outcomes. It also remains unclear from the announcement how quickly the rate increase will affect borrowing costs across different households and businesses.
Future Rate Decisions Depend on Data
Norges Bank’s rate forecast points to the policy rate staying close to 4.5% for a period before declining somewhat. The committee said it would set rates with the aim of returning inflation to target, and would consider further increases if needed. Its next moves will depend on incoming evidence about prices, wages, employment, commodity costs and international interest rates.
The bank’s projected milestones are inflation slowing from next year and reaching 2% in 2029, alongside some further cooling in the economy and a modest rise in registered unemployment. These remain projections. The announcement did not provide a fixed timetable for rate cuts or specify when the committee would next reconsider the policy rate.
Key Questions
What did Norges Bank decide?
The committee raised Norway’s policy rate by 0.25 percentage point to 4.5% on Sept. 24, 2026.
Why did the bank raise the rate?
Norges Bank said the increase is intended to help bring inflation toward its 2% target. September figures showed consumer price inflation at 3.3% and an underlying measure at 3.0%.
Will Norges Bank raise rates again?
The committee said it is prepared to raise the rate further if needed. It has not said that another increase is certain; future decisions depend on the economic outlook and incoming data.
When does Norges Bank expect inflation to reach 2%?
The bank’s forecast projects inflation moving down to 2% in 2029. That is a forecast, and the bank says the outlook is uncertain.
What could affect the inflation outlook?
Norges Bank pointed to energy and commodity prices, firms’ labour costs, the krone exchange rate and the Middle East conflict. Higher interest rates abroad may also affect Norwegian rates partly through the exchange rate.
Source: primary
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