Inflationary pressure persists. Norges Bank may change course before the summer holidays

Norges Bank will make its interest rate decision on March 26. The main rate has remained at 4 percent since September 2025. No change is currently expected. At the same time, forecasts for the coming months have changed significantly in recent weeks.

Until recently, rate cuts were expected in 2026. Norges Bank had signaled one or two cuts. New inflation data has changed the outlook. Additionally, the geopolitical situation is having an impact. The conflict in the Middle East has pushed up energy prices.

The market currently prices in about an 80 percent chance of a hike in June. By August, a rate increase is fully priced in by the market. Nordea Markets expects the rate to rise to 4.25 percent by mid-year. By the end of the year, a level of 4.5 percent is possible. The Central Statistical Bureau (SSB) does not foresee any cuts before 2027.

Residents are feeling the effects of high loan costs. Some no longer expect quick rate cuts, pointing to the uncertain global situation. High installments remain a significant burden on monthly budgets. Expectations are shifting towards further increases in financing costs.

Inflation in Norway remains above Norges Bank's target. In February, core inflation reached 3 percent. This is more than previously forecast. Rising energy prices may further boost inflation. At the same time, unemployment remains low. Ongoing wage negotiations may influence the future course of inflation.

In the coming weeks, new inflation data and the results of wage negotiations will be crucial. Their combination may determine the direction of Norges Bank's decision even before the summer holidays. At the same time, developments in the energy market remain a factor that could quickly change the scenario for the economy.