Norges Bank defends 2025 rate cuts, boosts transparency

Norges Bank reduced its policy rate twice in 2025, to 4.25 percent in June and 4 percent in September.

The June cut surprised many observers, a point highlighted by Norges Bank Watch.

Longva clarified that while the central bank does not aim to surprise, it sets rates based on its mandate.

He explained that underlying inflation declined more than expected through spring, confirming that an earlier inflation pickup was temporary, thus justifying the June reduction.

Leading up to the September meeting, market opinions diverged on whether Norges Bank would cut rates.

The Committee considered holding rates steady but ultimately decided to reduce them, while also signaling a potentially higher policy rate would be needed ahead.

Longva acknowledged the importance of communicating forecast uncertainty, noting steps taken with fan charts and plans for further improvements.

Longva addressed Norges Bank Watch's remarks on the Monetary Policy and Financial Stability Committee's composition, particularly the risk of internal dominance.

He detailed the committee's structured work to mitigate this risk, ensuring all members receive simultaneous access to identical information from Bank staff.

The decision-making process involves seminars with staff presentations, preliminary projections, and multiple discussions.

The Executive Director of Monetary Policy and later the Central Bank Governor present recommendations, with committee members offering preliminary assessments.

All decisions have been unanimous to date.

Longva announced plans to increase transparency by publishing summaries of these discussions, with practical details and start dates to be provided soon.