Key Takeaways
- Norges Bank unanimously voted to raise its policy rate, reversing both of last year’s rate cuts.
- The new interest rate path peaks at 4.60% and keeps rates elevated a little longer than projected in June.
- SEB, DNB Carnegie, and Handelsbanken see 4.50% as the peak but flag the risk of another hike.
Norges Bank raised interest rates by a quarter point to 4.50% at its Sept. 24 meeting, the second hike this year, and increased its rate forecasts for the rest of 2026. Expectations were split ahead of the decision, which brought rates back to their pre-pandemic peak, although derivatives market pricing leaned toward a hike.
The decision was unanimous, but the minutes show at least one member saw a case for leaving interest rates unchanged and waiting for further data. Others were concerned that monetary policy was not restrictive enough to bring inflation down.
The committee said the rapid rise in business costs in recent years will likely keep inflation elevated, and that it is prepared to raise rates further if the outlook warrants it.
On the other hand, Governor Ida Wolden Bache said that the medium-term inflation outlook “does not appear to have changed materially.”
Higher Rates Abroad Lift the Path
The new interest rate path peaks at 4.60%, up from 4.55% in June, and sees rates elevated a little longer before a gradual decline from late 2027 to just under 3.5% by the end of 2029.
Higher interest rates abroad were an important reason for the upward revision. The European Central Bank and the Federal Reserve each raised rates by 0.25 percentage points earlier this month. Rising long-term market rates led Norges Bank to lift its model estimate of the neutral rate by 0.2 percentage points to 3.2%, though the Norges Bank governor said the change did not affect the September decision or the near-term path. The neutral interest rate is where monetary policy is neither expansive or restrictive.
Kjetil Olsen, chief economist at Nordea, said that a weaker interest rate path today from the bank would have put pressure on the Norwegian krone.
What Are the Key Norges Bank Interest Rates?
- Policy rate: 4.50%
- Overnight lending rate: 5.50%
- Reserve rate: 3.50%
When Are the Next Interest Rate Decision Dates?
- Nov. 5, 2026
- Dec. 17, 2026
- Jan. 21, 2027
- March 18, 2027
Inflation Outlook Little Changed
Core CPI-ATE inflation, consumer prices adjusted for tax changes and excluding energy products, rose to 3.0% year over year in August from 2.7% in June and July, below Norges Bank’s June forecast of 3.3%. The central bank cut its 2026 core inflation forecast to 3.0% from 3.2%. It expects core inflation to hover between 2.7% and 2.9% in the coming months, before returning to the 2% target in 2029.
But oil and gas prices have risen since June, supporting inflation, with shipping through the Strait of Hormuz still limited. Norges Bank now assumes oil at USD 96 a barrel this year and USD 83 in 2027, both revised up. But a krone slightly more than 1% stronger than assumed in June partly offsets the pressure. Wage growth is projected at 4.4% this year and 4.0% in 2027.
Has the Norges Bank Stopped Hiking?
“We believe that the policy rate peak has been reached, though risks are skewed to the upside as Norges Bank’s near-term inflation trajectory appears too optimistic,” says Erica Dalstø, chief strategist Norway at SEB, an investment bank. SEB calculates the rate path implies about a 25% chance of a December hike and a cumulative 40% by March. It reads the divided committee as a sign that the bar for further tightening is higher.
DNB Carnegie also forecasts 4.50% as the peak in rates but sees a high risk of another hike by year-end. Chief Economist Kjersti Haugland says a December hike is likely if core inflation surprises to the upside in the near term or global energy prices rise further.
Handelsbanken, which had expected the hike, keeps its baseline of 4.50% as the peak in rates, with two cuts over 2027 and 2028. It notes the path implies around a 50% probability of another hike toward next summer. Handelsbanken’s Nora Vie Holm says “the risk of another rate hike remains.”
