Norges Bank maintains policy rate at 4 percent, signals future cuts

Norges Bank's Monetary and Financial Stability Committee has maintained the policy rate at 4 percent, following a cautious normalisation that saw rates reduced from 4.5 percent last year.

Governor Ida Wolden Bache emphasized that the central bank is not in a hurry to lower the policy rate further, stating, 'The job of tackling inflation has not been fully completed.'

Inflation, excluding energy prices, has hovered near 3 percent since autumn 2024, still above the bank's 2 percent target.

The rapid rise in food and services prices, coupled with strong business cost growth, is contributing to elevated inflation, although lower wage growth is anticipated to exert downward pressure further out.

The central bank's mandate is to ensure low and stable inflation, close to 2 percent, while also promoting high employment and economic stability.

Recent labour market data presents a mixed picture: unemployment has increased somewhat in recent years, and the employment rate has slightly decreased.

However, registered unemployment has shown a modest decline, and employment growth appears somewhat weaker than previously projected.

Geopolitical tensions, particularly regarding potential US tariffs on Norwegian goods, were noted as a source of uncertainty, though the Committee assessed their likely impact on the Norwegian economy as limited, especially after the tariffs were announced not to be imposed.