Policy rate held at 4.25 percent as wage pressures persist
Norges Bank maintained the policy rate at 4.25 percent while cautioning that another hike may still be required to return inflation to 2 percent. The Monetary Policy and Financial Stability Committee pointed to lingering wage pressures and Middle East shipping disruptions.
Headline inflation eases to 3 percent
Consumer price inflation slowed to 3.0 percent in July, while inflation excluding tax changes and energy products stood at 2.7 percent.
Although price growth decelerated faster than projected over the summer, the Monetary Policy and Financial Stability Committee emphasized that inflation remains noticeably above the 2 percent target.
Upward pressure stems largely from domestic labor costs following substantial wage increases across Norwegian firms.
External impulses remain mixed: while the krone has stabilized after early summer weakness, gas prices have risen and Middle East tensions continue to disrupt shipping through the Strait of Hormuz, maintaining commodity volatility.
Steady job market, subdued construction
Broader macroeconomic activity continues to track earlier projections.
Private consumption has expanded, whereas residential construction activity remains depressed and house prices fell in July, dropping below previous estimates.
Unemployment has remained stable throughout the summer months.
The committee affirmed that maintaining a restrictive stance is essential to prevent high inflation from becoming embedded in business and household expectations, noting that another rate increase remains possible.
A pause without promises
By holding rates while retaining an explicit bias toward tightening, Norges Bank prioritizes inflation credibility.
The persistent threat of additional rate increases serves primarily to keep domestic financial conditions tight.
Until wage momentum subsides, expectations of near-term rate relief remain completely unjustified.
Source: Policy rate kept unchanged at this meeting
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