Monetary policy has contributed to cooling down the Norwegian economy and to dampening inflation in recent years. Inflation has fallen markedly but is still above the 2 percent target. At the same time, unemployment has increased somewhat. Capacity utilisation in the economy has declined and is close to a normal level. The policy rate was reduced from 4.5 percent to 4 percent last year.

“We are not in a hurry to reduce the policy rate further. Inflation is still too high. Inflation excluding energy prices has been close to 3 percent since autumn 2024”, says Governor Ida Wolden Bache.

The Committee judges that a restrictive monetary policy is still needed. Inflation is still too high. 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 December was consistent with one to two rate cuts in the course of 2026. The geopolitical situation is causing uncertainty, but the Committee's current assessment is that the interest rate outlook has not changed materially since December. The Committee judges that it is appropriate to keep the policy rate unchanged at this meeting.

“The current geopolitical situation is tense and is causing uncertainty, including about the economic outlook”, says Governor Ida Wolden Bache.

The future path of the policy rate will depend on economic developments. If labour market conditions weaken more than expected or the outlook indicates that inflation will return to target faster, the policy rate may be lowered faster than envisaged in December. On the other hand, if growth in business costs remains elevated for longer, or the krone proves weaker than projected, inflation could remain elevated for longer than projected in December. A higher policy rate than envisaged at that time may then be required.

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

New forecasts were not prepared for this meeting. Monetary Policy Report 1/26 will be published along with the monetary policy decision on 26 March 2026.