Key Takeaways
- Consensus forecasts point to Norges Bank holding interest rates at 4.25%, with markets pricing virtually no probability of a hike.
- Core inflation held at 2.7% in July, 0.6 percentage points below Norges Bank’s forecast.
- Most forecasters still expect one final rate increase to 4.50% in September, but the call has become considerably less certain.
Norges Bank is widely expected to keep its policy rate unchanged at 4.25% at its meeting on Thursday, Aug. 13. This is an interim decision, meaning it will not be accompanied by new forecasts or an updated interest rate path. The next full Monetary Policy Report is due in September.
The Norwegian central bank delivered the first interest rate hike of the current cycle in May, lifting the policy rate from 4.00% to 4.25%, and used the June Monetary Policy Report to raise its rate path to a peak of 4.55% in the fourth quarter. The committee said it “will likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings.” According to DNB Carnegie’s calculations, that path implied slightly less than a 50% probability of an August hike. Two consecutive sets of inflation data below forecasts have since settled the question for most analysts.
Inflation Well Below Norges Bank’s Forecast
Core inflation (CPI-ATE) was unchanged at 2.7% year over year in July, below the consensus expectation of 2.9% and far below Norges Bank’s projection of 3.3%. The reading confirms June’s surprise drop from May’s 3.4% and leaves core inflation 0.6 percentage points under the central bank’s trajectory for a second consecutive month.
“We can now say with a high degree of confidence that there will be no rate hike this week,” says Nora Vie Holm, macro economist at Handelsbanken. She notes that the July decline was driven by imported inflation, while price growth in domestically produced goods and services, long the more persistent challenge, picked up again.
The shift in momentum is even clearer in the seasonally adjusted figures. Oddmund Berg, senior economist at DNB Carnegie, says that seasonally adjusted core inflation has come down from 3.2% in May to 2.1% in July, largely driven by goods prices. He estimates that core inflation will remain around 2.7% to 2.8% in August.
The labour market, meanwhile, remains broadly as Norges Bank expected, with registered unemployment edging back up to 2.1% in July after dipping to 2.0% in June.
A Turbulent Global Backdrop
The summer’s geopolitical turmoil, with wild swings in oil prices, has added a further layer of uncertainty. Both spot and futures oil prices now sit below Norges Bank’s assumptions in the June report, while European natural gas prices have moved higher. Sweden’s SEB says that the Norwegian central bank remains particularly wary of energy costs spilling over into broader price dynamics, as the central bank has emphasized that monetary policy cannot fully look through supply-side shocks.
Marius Gonsholt Hov and Nils Kristian Knudsen at Handelsbanken add that a surprisingly weak US labour market report for July has damped global rate expectations, with markets now pricing slightly less than a 50% chance of a Federal Reserve hike in September.
Norges Bank Key Interest Rates
- Policy Rate: 4.25%
- Overnight Lending Rate: 5.25%
- Reserve Rate: 3.25%
Is the September Hike Still Coming?
Erica Dalsto, chief strategist for Norway at SEB, expects the central bank’s committee to leave both the rate and its guidance untouched on Thursday.
“It will be harder for the hawkish members to gain a majority” for an August move, she says, noting that the committee is divided and that unexpectedly low summer inflation creates the same uncertainty about underlying trends that made the committee pause in March. SEB still forecasts a September hike but calls it highly data dependent.
Kjetil Olsen, chief economist at Nordea, and Sara Midtgaard, senior macro and rates strategist, still expect one further hike this autumn. “We are not convinced that underlying price pressures are as weak as the latest inflation reading suggests,” they say of the June print.
DNB Carnegie has changed its call twice over the summer, first moving the expected hike forward to August after the June meeting, then back to September once the inflation surprises landed. “The incoming data since the June meeting have reduced the urgency to tighten,” say senior economists Oddmund Berg and Kyrre Aamdal, adding that the numbers increasingly call into question whether the policy rate needs to reach 4.50% at all.
Where Next for Interest Rates?
Market pricing has moved decisively since the June inflation print, and the July figures cemented the shift. The interest rate market assigns virtually no probability of a hike on Thursday and prices roughly 14 basis points of tightening by the September meeting. The implied peak sits just below 4.50% around year-end, under the 4.55% signalled in the June rate path and marginally below the 4.50% top that SEB and DNB Carnegie both forecast.
The postponed second-quarter figures for average monthly earnings are due on the morning of the decision itself, with preliminary monthly data suggesting wage growth has been running well below the pace seen in the first quarter. Before the September meeting, Norges Bank will also receive the August inflation figures on Sept. 10, second-quarter mainland GDP and a new Regional Network survey.
Norges Bank Interest Rate Decision Dates:
- Aug. 13, 2026.
- Sept. 24, 2026.
- Nov. 5, 2026.
- Dec. 17, 2026.
- Jan. 21, 2027.
Norges Bank’s Monetary Policy and Financial Stability Committee meets on Wednesday, Aug. 12, with the monetary policy announcement due at 10:00 CEST on Thursday, Aug. 13, and a press conference at 10:30 CEST.
