Norges Bank holds policy rate at 4 percent

Monetary policy has contributed to cooling down the Norwegian economy and dampening inflation in recent years.

Inflation has fallen markedly but remains above the 2 percent target.

Unemployment has increased somewhat, and capacity utilisation in the economy has declined to a near-normal level.

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

Inflation is still too high.

Inflation excluding energy prices has been close to 3 percent since autumn 2024." The Committee judges that a restrictive monetary policy is still needed to ensure inflation returns to target sustainably.

Lowering the policy rate too quickly could risk inflation remaining above target for too long, while an overly tight stance could restrain the economy more than necessary.

The policy rate was reduced from 4.5 percent to 4 percent last year.

The Committee's December forecast was consistent with one to two rate cuts in 2026. While the geopolitical situation introduces uncertainty, the Committee's current assessment is that the interest rate outlook has not materially changed since December.

Governor Ida Wolden Bache noted, "The current geopolitical situation is tense and is causing uncertainty, including about the economic outlook.

" The future path of the policy rate will depend on economic developments.

Weaker labour market conditions or a faster return of inflation to target could lead to quicker rate reductions.

Conversely, elevated business costs or a weaker krone could necessitate a higher policy rate than currently envisaged.