Key Takeaways
- Forecasters are almost evenly divided over a 0.25 percentage point rate hike, with a slim majority expecting a hike.
- Core inflation returned to 3.0% in August, leaving it 0.3 percentage points below Norges Bank’s forecast.
- Oil prices remain well above the levels embedded in Norges Bank’s June assumptions despite easing over the past week.
The Norwegian central bank faces an unusually close call on Sept. 24, with economists narrowly divided and the balance of arguments tilting toward a rate hike.
This follows an increase in interest rates in May to 4.25%. A month later, Norges Bank’s interest rate path indicated at least one further hike to 4.50% and the probability of a rise to 4.75%. Since then, inflation has remained below the bank’s projections, but elevated wage growth, energy prices and higher interest rate expectations abroad have kept another hike on the table.
“The overall picture has not changed sufficiently for Norges Bank to deviate from this now,” says Marius Gonsholt Hov, chief economist Norway at Handelsbanken. SEB and Nordea reach the same conclusion, though all three stress the decision is finely balanced. “We have ultimately come down on the side of a rate hike,” says Kjetil Olsen, chief economist at Nordea. “We have low conviction in our call.”
CPI-ATE, consumer prices adjusted for tax changes and excluding energy products, fell to 2.7% in both June and July, running 0.6 percentage points below Norges Bank’s trajectory. The decline was concentrated in food and other goods prices, with the latter likely reflecting a correction after unusually large increases during spring. The August inflation reading returned to 3.0%, with the uptick driven by base effects from reduced childcare fees a year earlier. Domestically produced goods and services, the more stubborn component, picked up again to the levels seen in March through May. Other underlying inflation measures have moved sideways, averaging around 3.1% in recent months, says Handelsbanken’s Hov.
Wage growth of 4.5% this year and 4.0% next year, as indicated by survey responses in Norges Bank’s Regional Network, remains the key source of persistent cost pressure. Combined with moderate productivity growth, these wage increases would keep unit labor cost growth elevated. Getting inflation back to 2% would likely require either faster productivity growth or companies absorbing more of the cost increases themselves. The near-term inflation forecast is likely to be revised lower, but the medium-term picture has not shifted decisively in the view of those economists who expect a rate hike this week.
According to Nordea’s Olsen, higher energy prices and rising interest rate expectations abroad still favor a rate hike, despite inflation coming in below Norges Bank’s forecast.
Norges Bank Key Interest Rates
- Policy Rate: 4.25%
- Overnight Lending Rate: 5.25%
- Reserve Rate: 3.25%
Oddmund Berg, senior economist at DNB Carnegie, expects Norges Bank to hold rates, arguing that softer inflation, weaker activity data and a stronger krone together make a case for patience. “The cost of waiting is currently low,” he says. Mainland GDP has undershot Norges Bank’s forecast by 0.2 percentage points accounting for revisions, and businesses are reporting more spare capacity than expected. Berg nonetheless expects the rate path to signal that further hikes remain possible, with the committee ready to act should disinflation stall.
Frank Jullum, chief economist at Danske Bank, also expects a hold. His model path analysis suggests the rate path will be lowered by 15 to 20 basis points from June, reducing the implied peak to around 4.35% to 4.40%, but with the probability of a further hike remaining just above 50%.
What Will Norges Bank Do After This Week?
Erica Dalstø, chief strategist Norway at SEB, expects the policy rate to peak at 4.50%, followed by gradual normalisation from late 2027, reaching 3.75% by end-2028. Hov at Handelsbanken expects the rate path to retain some probability of a 4.75% peak.
If Norges Bank holds this week, Nordea’s Olsen expects a rate hike in November. More broadly, he argues that structural forces, including large fiscal deficits, European rearmament spending and the AI investment boom, are raising the global neutral rate—the rate that neither stimulates nor depresses the economy. “We are much more confident about the broader message: Interest rates are likely to remain around current levels for an extended period,” he says.
The government adopted a new Monetary Policy Regulation on Sept. 18, retaining the 2% inflation target.
Norges Bank Interest Rate Decision Dates
- Sept. 24, 2026
- Nov. 5, 2026
- Dec. 17, 2026
- Jan. 21, 2027
- March 18, 2027
Norges Bank announces its decision at 10:00 CEST on Thursday, Sept. 24, accompanied by a full Monetary Policy Report with updated forecasts and a new interest rate path. A press conference follows at 10:30 CEST.
