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Norwegian Krone Rises, Loans Will Be Cheaper. We Know the Norges Bank Decision
The Norwegian krone can enjoy a bonus for the predictable and moderate policy of Norges Bank. Fot. Adobe Stock, licencja standardowa
At its meeting on September 17, 2025, the Monetary Policy and Financial Stability Committee of Norges Bank decided to lower the key policy rate from 4.25% to 4.0%. The decision was announced on September 18, emphasizing that although inflation is falling, it still remains above the bank's target (2.0%). The bank signals the possibility of further cuts if the economic situation develops as expected.
The committee stated that the key policy rate as of September 19, 2025, is 4.0%, which means a reduction of 0.25 percentage points from 4.25%. The decision was made unanimously. The statement emphasized that despite the rate cut, there is still a need to maintain a tight monetary policy to counteract persistent inflation above the 2.0% target. The bank notes that lowering rates too quickly could result in inflation remaining above the target for too long.
Inflation and Unemployment in Norway
Norges Bank notes that economic growth in Norway is higher than previous forecasts, and resources in the economy are less available than previously thought. At the same time, unemployment has risen slightly from a low level, but capacity utilization is moving towards normal levels.
The bank emphasizes that core inflation (excluding the effects of taxes and energy prices) and domestic production costs continue to support inflationary pressure. Eliminating this pressure will be important to achieve the inflation target in the coming years.
The bank emphasizes that core inflation (excluding the effects of taxes and energy prices) and domestic production costs continue to support inflationary pressure. Eliminating this pressure will be important to achieve the inflation target in the coming years.
Norwegian Krone After Norges Bank Decision
After Norges Bank's decision to lower the key policy rate to 4.0%, the Norwegian krone strengthened against major currencies. The dollar exchange rate fell to about 9.76 NOK, marking the weakest level of the US currency against the krone since December 2022, while the euro costs about 11.57–11.58 NOK.
Analysts quoted by E24 emphasize that investors reacted to the bank's signal that further rate cuts will proceed gradually, which supports the krone's attractiveness. Nils Kristian Knudsen from Handelsbanken pointed out that Norges Bank's moderate approach limits the risk of a sharp weakening of NOK and increases interest in the currency on international markets.
Analysts quoted by E24 emphasize that investors reacted to the bank's signal that further rate cuts will proceed gradually, which supports the krone's attractiveness. Nils Kristian Knudsen from Handelsbanken pointed out that Norges Bank's moderate approach limits the risk of a sharp weakening of NOK and increases interest in the currency on international markets.
Forecasts indicate that further developments in the currency market will depend on central bank monetary policy, oil prices, and global conditions.Photo: Adobe Stock, standard license
Interest Rates in Norway. When Is the Next Cut?
The bank's forecasts indicate that the key policy rate will gradually decrease and may be slightly above 3.0% by the end of 2028. The bank predicts that the average mortgage rate (boliglånsrente) will fall to just over 4.5% in the same period.
If more positive signals emerge regarding falling inflation or a weakening labor market, rate cuts may come faster. On the other hand, if inflation remains higher than expected or wage costs rise more sharply, it may be necessary to maintain or even raise the rate.
If more positive signals emerge regarding falling inflation or a weakening labor market, rate cuts may come faster. On the other hand, if inflation remains higher than expected or wage costs rise more sharply, it may be necessary to maintain or even raise the rate.
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