Key Takeaways
- Norges Bank unanimously held its policy rate at 4.25%, as widely expected.
- Governor Ida Wolden Bache said inflation has fallen and been lower than expected but cautioned it is too early to conclude the outlook has materially changed.
- The committee softened its June language from “will likely” need to hike to “it may still become necessary,” shifting attention to September when new forecasts are due.
Norges Bank unanimously kept its policy rate unchanged at 4.25% at its August meeting. The committee also softened its forward guidance, saying it “may still become necessary” to raise interest rates, whereas in June it said this would “likely be necessary” at one of the forthcoming meetings. No new forecasts were prepared for this meeting, and updated projections and a new rate path will be published alongside the Monetary Policy Report on Sept. 24.
“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,” Governor Ida Wolden Bache said. The committee noted that while price growth has eased, the underlying drivers of inflation appear largely unchanged since June, and that rising costs for firms will continue to push up prices ahead.
What Are the Key Norges Bank Interest Rates?
- Policy rate: 4.25%
- Overnight lending rate: 5.25%
- Reserve rate: 3.25%
Lower Inflation Raises Questions About the Rate Path
Core CPI-ATE fell to 2.7% year over year in both June and July, 0.6 percentage points below Norges Bank’s June projection of 3.3%. Both imported and domestically produced prices came in weaker than forecast. The committee discussed whether the decline is temporary or the start of a faster return to target, noting that food, beverages, and electronics prices drove much of the downside, but that broader measures of underlying inflation have fallen by less and remain somewhat higher than CPI-ATE. Higher electricity and grid rental prices lifted headline CPI to 3.0% in July, roughly in line with the June projection.
DNB Carnegie Senior Economist Oddmund Berg says the decline could cut both ways: some subcomponents point to a temporary dip, but the pattern could also suggest the krone has weighed on import prices more than Norges Bank assumed, meaning the underlying trend may be weaker. Investment bank SEB views the committee’s reasoning as “a tad hawkish” for not fully acknowledging the positive inflation developments, noting that broader signals still point to elevated price pressures. “A reiteration of ‘one of the forthcoming meetings’ would implicitly have cemented a September hike, which in our view would have been very hawkish given recent inflation developments and current market pricing,” says Erica Dalstø, chief strategist Norway at SEB. At the press conference, Bache was asked repeatedly about the removal of the June language but declined to comment directly.
- Policy rate: 4.25%
- Overnight lending rate: 5.25%
- Reserve rate: 3.25%
Lower Inflation Raises Questions About the Rate Path
Core CPI-ATE fell to 2.7% year over year in both June and July, 0.6 percentage points below Norges Bank’s June projection of 3.3%. Both imported and domestically produced prices came in weaker than forecast. The committee discussed whether the decline is temporary or the start of a faster return to target, noting that food, beverages, and electronics prices drove much of the downside, but that broader measures of underlying inflation have fallen by less and remain somewhat higher than CPI-ATE. Higher electricity and grid rental prices lifted headline CPI to 3.0% in July, roughly in line with the June projection.
DNB Carnegie Senior Economist Oddmund Berg says the decline could cut both ways: some subcomponents point to a temporary dip, but the pattern could also suggest the krone has weighed on import prices more than Norges Bank assumed, meaning the underlying trend may be weaker. Investment bank SEB views the committee’s reasoning as “a tad hawkish” for not fully acknowledging the positive inflation developments, noting that broader signals still point to elevated price pressures. “A reiteration of ‘one of the forthcoming meetings’ would implicitly have cemented a September hike, which in our view would have been very hawkish given recent inflation developments and current market pricing,” says Erica Dalstø, chief strategist Norway at SEB. At the press conference, Bache was asked repeatedly about the removal of the June language but declined to comment directly.
September Decision Hinges on August Inflation
Existing home prices fell markedly in July and construction activity remains low, with some committee members flagging the risk that lower housing prices could dampen activity further. The labor market has developed broadly as expected, with registered unemployment at 2.1% in July.
Both SEB and DNB Carnegie maintain their calls for a final rate increase to 4.50% in September. DNB Carnegie’s preliminary estimates for August inflation suggest core inflation will rise again, partly because higher kindergarten prices are estimated to add around 0.2 percentage points to CPI-ATE, highlighting that price pressures have not disappeared.
Investment bank Handelsbanken describes the decision as reflecting “a somewhat more cautious central bank.” The market is now leaning toward another unchanged decision in September, but only marginally, and the outcome remains open, says Nora Vie Holm, economist at Handelsbanken. If inflation once again surprises to the downside, the bar for a September hike will be higher, she says. Nordea’s chief economist Kjetil Olsen says the question has shifted from “how many hikes” to “whether there is one more at all.”
The Key Norges Bank Interest Rate Decision Dates
- Sept. 24, 2026
- Nov. 5, 2026
- Dec. 17, 2026
- Jan. 21, 2027.
- March 18, 2027
