How is the policy rate set?
The policy rate is set by the Monetary Policy and Financial Stability Committee, normally eight times a year.
The Committee is composed of five members. The Governor of Norges Bank is the chair of the Committee and the Deputy Governors are the first and second deputy chair. The other two members are not employees of Norges Bank.
Monetary policy meetings and Monetary Policy Report
Committee meetings where policy rate decisions are made are referred to as monetary policy meetings.
Prior to the monetary policy meetings, the Committee is presented with an updated picture of the Norwegian and global economy.
Monetary Policy Report is published following 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.
Based on the analyses, the Committee assesses the policy rate decision and future interest rate developments. In Monetary Policy Report, Norges Bank publishes a forecast of future policy rate developments. This forecast is also called the policy rate path and is shown in "Monetary policy assessments" in every Monetary Policy Report.
Monetary policy assessments
The task of the Committee 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 Committee must then weigh the various considerations against each other.
Upon publication of each policy rate decision, the Committee provides an account of both the monetary policy assessments 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.
Changes in the policy rate influence activity levels across the whole economy and thereby inflation. The impact is transmitted through various channels and often with some lag.