“The job of tackling inflation has not been fully completed. A restrictive monetary policy is still needed. At the same time, we do not want to restrain the economy more than needed. In June, we began a prudent easing of monetary policy, and it will likely be appropriate to continue with a cautious normalisation of the policy rate ahead,” says Governor Ida Wolden Bache.

The policy rate was raised significantly to tackle high inflation. The interest rate has contributed to cooling down the Norwegian economy and to dampening inflation. Inflation has fallen in recent years but is still above target. At the same time, unemployment has increased somewhat from a low level. The output gap has narrowed, and output is now close to potential. In June, the Committee began a cautious normalisation of monetary policy and reduced the policy rate from 4.5 percent to 4.25 percent.

The Committee judges that a restrictive monetary policy is still needed but that it will likely be appropriate to continue with a cautious normalisation of the policy rate ahead. Inflation is still above target. If the policy rate is lowered too quickly, inflation could remain above target for too long. On the other hand, an overly tight monetary policy stance could restrain the economy more than needed to bring inflation down to target. The policy rate forecast presented in June declines to just below 4 percent at the end of 2025. Since the previous monetary policy meeting, oil prices have fallen, while the krone has weakened a little more than assumed. The overall outlook for the Norwegian economy appears to have remained broadly unchanged. The Committee judges that it is appropriate to keep the policy rate unchanged at this meeting.

“The policy rate forecast we presented in June indicated one or two additional rate cuts in the course of the year. We have not drawn up new forecasts now, but the information we have received so far indicates that the outlook for the Norwegian economy has remained broadly in line with the outlook in June,” says Governor Ida Wolden Bache.

The uncertainty surrounding the outlook is greater than normal, and the future path of the policy rate will depend on economic developments. Trade policy changes are causing uncertainty about both Norwegian and international inflation and growth prospects. If prospects suggest that wage and price inflation will remain elevated for longer than projected, a higher policy rate than envisaged in June may be required. If prospects suggest that price inflation will return to target faster than projected or unemployment rises more than projected, the policy rate may be reduced faster.

The Committee will have received more information about economic developments ahead of its next monetary policy meeting in September, when new forecasts will be presented.

New forecasts have not been prepared for this monetary policy meeting. Monetary Policy Report 3/25 will be published along with the monetary policy decision on 18 September 2025.