Norges Bank holds policy rate at 4 percent, eyes future cuts

Norges Bank's Monetary and Financial Stability Committee maintained the policy rate at 4 percent.

Governor Ida Wolden Bache stated, "We are not in a hurry to reduce the policy rate further.

" She emphasized that the task of tackling inflation is not yet complete, as inflation excluding energy prices has remained close to 3 percent since autumn 2024. This is primarily driven by rapid price increases for food and many services.

While strong growth in business costs is expected to restrain disinflation in the near term, lower wage growth is anticipated to push down inflation further out.

The Committee's assessment is that lowering the policy rate too quickly could risk inflation remaining above the 2 percent target for too long.

Norges Bank's mandate encompasses maintaining low and stable inflation, promoting high employment, and ensuring economic stability.

Following sharp rate hikes in 2022, the central bank initiated a cautious normalisation last year, reducing the policy rate from 4.5 percent to 4 percent.

The labor market shows mixed signals: unemployment has increased somewhat in recent years, and the employment rate has slightly decreased.

While registered unemployment recently declined, employment growth appears weaker than projected.

Geopolitical tensions, including a withdrawn US tariff threat, were acknowledged but deemed to have a limited impact on Norway's economy, according to the Committee's assessment.