Bache: Norwegian economy strong, inflation elevated, rates raised
Norges Bank Governor Ida Wolden Bache noted strong growth and high employment in the Norwegian economy. She highlighted that inflation remains elevated despite the policy rate having been raised.
Growth and employment remain robust
Norges Bank Governor Ida Wolden Bache presented an overview of the Norwegian economy, noting that mainland GDP growth picked up significantly in 2025.
Employment remains high, with the employment-to-population ratio for those aged 15-74 showing sustained strength.
Despite this robust economic activity, inflation in Norway continues to be elevated.
The Consumer Price Index (CPI) and the CPI adjusted for tax changes and excluding energy products (CPI-ATE) both show high twelve-month changes, indicating persistent price pressures.
Domestic inflation, as measured by CPI-ATE for domestically produced goods and services, is also still high, contributing significantly to the overall inflation picture.
Policy rate raised, future outlook mixed
In response to the elevated inflation, Norges Bank has raised its policy rate, as illustrated by the upward trend in the policy rate chart, with the March 2026 forecast indicating a continued firm stance.
Looking ahead, the central bank's March forecast suggests prospects for somewhat higher unemployment and lower inflation further out in the projection period.
This outlook is influenced by external factors such as a sharp rise in oil prices, which could impact the economy, and a stronger krone, as indicated by the import-weighted exchange rate index (I-44), which has appreciated.
Balancing act continues
The Governor's presentation underscores Norges Bank's delicate balancing act: a robust economy with persistent inflation.
This necessitates a vigilant monetary policy, even as forecasts point to future disinflation and slightly higher unemployment.
The current strength, coupled with external factors, complicates the path to the inflation target.
Source: The conduct of monetary policy
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