Is the Worst-Case Scenario Coming True? Norges Bank May Have No Choice

After the SSB data, DNB Carnegie no longer expects interest rate cuts. The brokerage assumes the current key policy rate will be maintained for the coming years. An increase is not ruled out either. In January, CPI inflation rose to 3.6%, clearly above Norges Bank's target (CPI-ATE should be 2.0%).

DNB Carnegie previously assumed there would be one interest rate cut in 2026, scheduled for June. The new inflation data has changed these assumptions. Economists point to persistent price pressures. Inflation remains clearly above the 2% level.

Senior economist Kyrre Aamdal highlights rising service prices and also emphasizes the importance of strong wage growth. In his view, inflation may remain elevated for several years. This limits the room for monetary policy easing. According to DNB Carnegie, the window for rate cuts may be closing.

Wage growth has remained high for several years. SSB data indicates wage dynamics at 5% in 2026. This increases the risk of further inflationary pressure. At the same time, industrial profitability is higher than previously assumed.

Economists point to the good condition of the economy. Investments are rising, including in the housing sector. Economic activity indicates resilience to the current interest rate level. Some banks, including Nordea Markets, also no longer expect cuts in 2026. Forecasts now also include the possibility of a rate hike.

The next Norges Bank meeting is scheduled for March 26 and will be accompanied by a new interest rate projection. Core inflation rose to 3.4% in January, also above expectations. After the data was released, the Norwegian krone strengthened. This may help ease price pressures through cheaper imports. At the same time, higher rates support a stronger NOK.