How is the policy rate set?
The policy rate is set by the Executive Board of Norges Bank, normally eight times a year.
The Executive Board is composed of eight members, appointed by the Government. The Governor of Norges Bank is the chair of the Board and the Deputy Governors are the first and second vice-chair. The other five members are not employees of Norges Bank. There are two alternate members, who are also external.
Monetary policy meetings and the Monetary Policy Report
Executive Board meetings where policy rate decisions are made are referred to as monetary policy meetings. These meetings are published in Norges Bank’s official calendar.
Prior to the monetary policy meetings, the Board is presented with an updated picture of the Norwegian and global economy.
The Monetary Policy Report is prepared for four of the monetary policy meetings together with a financial stability assessment. The Report describes the situation in the Norwegian and global economy and examines the economic outlook. The analyses in the Report form the basis of the Board’s assessments and the policy rate decisions.
The Executive Board’s assessment
The task of the Board at the monetary policy meetings is to set the policy rate in line with the Government’s monetary policy objectives.
All new relevant information and new assessments rarely point in the same direction. It is often the case that some factors suggest a higher policy rate, some factors imply an unchanged rate, while others may pull in the direction of a rate reduction. The Board must then weigh the various considerations against each other.
Upon publication of each policy rate decision, the Board provides an account of both the reasoning behind its judgement and the grounds for its voting. Publication is usually the day after the monetary policy meeting.
The new policy rate is effective from the first business day following publication of the policy rate decision.