Bache sees further rate increases as inflation pressures persist
Governor Ida Wolden Bache said Norges Bank would probably need further rate increases after raising its policy rate from 4.00 to 4.25 percent in May. She spoke on June 26, 2026; the remarks were published on October 19, 2026.
Larger shocks demand stronger responses
At the 25th Bank for International Settlements (BIS) Annual Conference in Basel, Bache said fragmentation may bring larger, more frequent shocks.
Trade restrictions, geopolitical tensions, climate change, the low-carbon transition and artificial intelligence add uncertainty.
Larger shocks can require stronger responses than linear policy rules imply, especially after prolonged above-target inflation.
But adverse supply shocks require balancing inflation control against damage to activity and employment, particularly when unemployment is already high.
Norway's Monetary Policy and Financial Stability Committee raised rates by 25 basis points in May.
Bache said another increase would probably be necessary at one of the forthcoming meetings.
Oil changes Norway's policy calculus
Bache cited the Middle East conflict and Strait of Hormuz closure.
Research in Monetary Policy Report 2/2026 finds energy shocks raise inflation, but their drag on advanced-economy GDP has diminished.
It finds no material effect on Norway's mainland activity from higher oil prices.
Household and business costs rise, while weaker foreign demand hurts non-oil exporters.
Petroleum investment supports oil services and wage growth.
Much oil revenue reaches the government through petroleum taxation; the fiscal rule saves most of it.
One shock, different policy trade-offs
Norway's oil exposure makes an energy shock more than a supply-side setback.
Bache sees a stronger case for tightening in energy-producing economies to contain second-round inflation effects.
Survey expectations remain mixed: economists and employee and employer groups are near pre-pandemic norms, households and business leaders elevated.