Policy rate raised 25 basis points to 4.50 percent
Norges Bank raised the policy rate by 25 basis points to 4.50 percent at its September meeting. The decision aims to bring inflation back to the 2 percent target amid persistent price pressures and elevated business costs.
Sticky costs prompt policy tightening
The Monetary Policy and Financial Stability Committee raised the policy rate from 4.25 percent to 4.50 percent.
“Inflation has been above target for several years. By raising the policy rate, we are helping to reduce inflation,” Governor Ida Wolden Bache said.
While underlying inflation measured by CPI-ATE slowed and was lower than projected, headline CPI inflation exceeded forecasts.
Higher oil and gas prices and commodity costs sustain inflation risks, although a stronger krone dampens imported goods inflation.
The central bank indicated that the rapid rise in business costs risks entrenching inflation expectations among firms and households.
Forecasts signal extended hold
The updated rate path indicates that borrowing costs will remain elevated longer than projected in June before declining gradually.
Inflation is projected to slow from next year and reach the 2 percent target in 2029.
Mainland activity has increased as expected, while unemployment remains slightly below pre-pandemic levels.
The government also issued a revised monetary policy regulation on September 18, which retains identical wording for core objectives.
Prioritizing credibility over growth
Norges Bank is taking no chances with stubborn domestic price pressures, preferring additional economic cooling over entrenched inflation psychology.
Pushing the target arrival out to 2029 reveals how protracted the final stretch of disinflation has become.
For borrowers and businesses, rate relief remains a distant prospect.
Source: Policy rate raised to 4.50%
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