Bache reviews inflation path and policy rate projections
Norges Bank Governor Ida Wolden Bache delivered the Schweigaard lecture, addressing key questions on inflation targeting, employment trade-offs and policy rate projections. The presentation evaluated historical inflation dynamics alongside regional interest rate developments across Scandinavia.
From target deviations to Scandinavian divergence
In the annual Schweigaard lecture, Governor Ida Wolden Bache examined the mechanics of inflation targeting and monetary policy trade-offs.
The analysis traced Norwegian inflation dynamics from 2001 to 2026, measuring consumer price index movements against the official target.
Drawing on data from Statistics Norway and the Norwegian Labour and Welfare Administration, Bache evaluated registered unemployment alongside underlying inflation measured by the CPI-ATE.
The presentation incorporated projections from the June 2026 Monetary Policy Report extending through 2028.
Bache also compared policy rate paths across Scandinavia, highlighting divergences in key rate levels between Norway, Sweden, and Denmark from 2020 through 2026.
Shifting projection corridors since 2021
A central focus of the lecture was the evolution of policy rate forecasts since 2021.
Norges Bank reviewed consecutive June projections from 2021 through 2026, illustrating how rate paths adjusted in response to post-pandemic inflationary pressures.
While Denmark maintained policy rates tied to the euro peg and Sweden adjusted its policy stance rapidly, Norway navigated distinct domestic labor market conditions, balancing capacity utilization with price stability requirements.
Candor over certainty
Comparing multi-year forecast vintages against realized rate paths demonstrates commendable institutional candor.
Yet charting past adjustments does not eliminate the ongoing tension between core price stability and economic growth.
Published rate projections remain conditional tools rather than reliable commitments during structural shocks.