Norges Bank has made its decision. Economists' predictions have come true
Norges Bank has raised the main interest rate from 4 percent to 4.25 percent. The decision was made by the Monetary Policy and Financial Stability Committee at a meeting on May 6. The new rate will take effect on May 8, 2026.
Norwegian residents will pay higher loan installments.
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Norway's central bank indicated that the monetary policy outlook has not changed significantly since the March meeting. At the same time, it emphasized the high uncertainty regarding the further development of the economic situation in Norway. In March, the Committee assessed that a rate hike might be appropriate at one of the upcoming meetings. Now it has concluded that such a move is necessary.
Inflation remains above target. This is how Norges Bank assessed the situation
According to Norges Bank, inflation is too high and has remained above target for several years. In March, the CPI in Norway rose to 3.6 percent. After excluding tax changes and energy prices, it remained at 3 percent, compared to the ideal level of around 2.0 percent.
Norges Bank Governor Ida Wolden Bache stated that data from recent weeks support the analyses presented in March. The institution also points to the prospect of higher inflation in the coming months. Wage expectations are also significant. The wage growth norm in industry was set close to the bank's March forecast for annual wage growth.
Norges Bank Governor Ida Wolden Bache stated that data from recent weeks support the analyses presented in March. The institution also points to the prospect of higher inflation in the coming months. Wage expectations are also significant. The wage growth norm in industry was set close to the bank's March forecast for annual wage growth.
The head of the central bank had already announced similar actions in March.Photo: Nils S. Aasheim/Norges Bank
Norway feels uncertain. All because of the war in the Middle East
Norges Bank emphasized that the war in the Middle East continues to affect economic prospects. The temporary ceasefire between the United States and Iran has not yet led to normalization of shipping through the Strait of Hormuz. Oil prices on the market remain elevated, and the value of futures contracts has changed little since March.
Additionally, prices of other commodities have increased. The bank assesses that external price pressure is somewhat stronger than assumed in March. At the same time, the Norwegian krone has strengthened and is stronger than previously assumed, which may limit so-called imported inflation.
Additionally, prices of other commodities have increased. The bank assesses that external price pressure is somewhat stronger than assumed in March. At the same time, the Norwegian krone has strengthened and is stronger than previously assumed, which may limit so-called imported inflation.
Norges Bank did not prepare new forecasts for the May meeting. The March rate path assumed an increase in the interest rate to a range between 4.25 percent and 4.5 percent by the end of the year. The bank noted that the further path may change if the economy develops differently from current assumptions. The next report is scheduled for June 18.
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