Norges Bank Holds Rates at 4%, Signals Future Hikes

The Norges Bank kept its policy rate steady at 4% in March, as expected, but revised its forecast upward, signaling a likely increase to 4.25–4.5% by year-end. Policymakers pointed to stubbornly high inflation, exacerbated by Middle East tensions, and elevated uncertainty in oil and gas markets as key drivers. While a tighter policy is expected to gradually reduce inflation to the 2% target by 2029, it may also slow economic growth, pushing unemployment toward pre-pandemic levels. The bank stressed it will await further data before deciding on the timing of the next move.

The Norges Bank left its policy rate unchanged at 4% at its first meeting of 2026, as widely expected. While acknowledging elevated uncertainty, the bank said rates could be lowered later in the year if the economy evolves as projected. Policymakers stressed that a restrictive monetary stance is still warranted, as inflation remains above target. They cautioned that easing policy too quickly could allow inflation to stay elevated for an extended period. At the same time, the bank warned that maintaining an overly tight stance for too long could weigh unnecessarily on economic activity and restrain growth more than required to bring inflation back to target. The Norges Bank reaffirmed its December rate forecast, which points to one to two rate cuts in 2026, despite heightened geopolitical uncertainty. However, officials emphasized that policy remains data-dependent and that both rate cuts and hikes remain possible, depending on how the economy and inflation evolve.

The Norges Bank left its key policy rate unchanged at 4% for a second straight meeting in December 2025, as widely expected, and indicated it is not in a hurry to lower rates. The bank emphasized that a restrictive monetary policy remains necessary, with inflation still above target and underlying inflation hovering close to 3% for some time, while the weaker krone contributes to raising inflation prospects. Policymakers also noted that the tightening cycle has helped cool the Norwegian economy and dampen inflation in recent years. While the outlook remains uncertain, the bank reiterated that if the economy evolves broadly as expected, the policy rate is likely to be reduced further over the coming year. Rate projections are little changed from the September report, pointing to 1-2 cuts in 2026 and a gradual decline to somewhat above 3% by late 2028.