“Norges Bank is tasked with keeping inflation close to 2% over time. Inflation has remained above target for several years, and the outlook indicates that inflation will be higher ahead than previously projected. Uncertainty is greater than normal due to the war in the Middle East, but the Committee judges that it will likely be necessary to raise the policy rate at one of the forthcoming monetary policy meetings”, says Governor Ida Wolden Bache.

In recent years, the tightening of monetary policy has contributed to cooling down the Norwegian economy and to dampening inflation. Last year, the policy rate was reduced from 4.5 to 4%. Since the monetary policy meeting in December, the Committee has noted the following:

• Inflation has been markedly higher than projected. At the same time, wage growth is projected to be higher this year than projected in December, which will likely restrain disinflation ahead. On the other hand, the krone has appreciated considerably. A stronger krone will dampen imported goods inflation.
• Capacity utilisation in the Norwegian economy appears to be holding steady at close to a normal level. Unemployment has been slightly lower than projected in December. Nonetheless, Norges Bank’s Regional Network contacts report that it has become a little easier to recruit.
• The war in the Middle East has led to high volatility in energy and financial markets. Oil and gas prices have increased sharply. At the same time, global equity indices have declined, and interest rates have increased both abroad and in Norway. Higher energy prices will likely reduce global growth and push up inflation both abroad and in Norway.

The job of tackling inflation has not been fully completed. The Committee placed emphasis on the fact that inflation has remained above target for several years now and that there are prospects for higher inflation ahead than previously projected. High inflation over time can lead firms and households to plan for greater inflation persistence. Inflation may then become entrenched.

The Committee judges that a tighter monetary policy stance is needed to return inflation to target within a reasonable time horizon. The inflation outlook indicates that an increase in the policy rate will likely be required. At the same time, the unexpected high inflation in recent months makes it difficult to assess underlying inflation pressures, and the uncertainty surrounding oil and gas prices is unusually elevated. The Committee therefore wants to await further information on the prospects for inflation.

The Committee decided to keep the policy rate unchanged at this meeting. The outlook is associated with substantial uncertainty, but if the economy evolves broadly as currently envisaged, the policy rate will likely be raised at one of the forthcoming meetings.

The policy rate forecast has been revised up since December and indicates an increase in the policy rate to between 4¼ and 4½% by the end of this year.

With a policy rate in line with the forecast, inflation is expected to decline from next year and reach 2.0% in 2029. A higher policy rate will cool the economy somewhat, and registered unemployment is projected to edge somewhat higher to around pre-pandemic levels.

The future path of the policy rate will depend on economic developments. The outlook is subject to greater uncertainty than normal due to the war in the Middle East. There have recently been wide swings in energy prices and the krone exchange rate. If energy prices remain elevated or move higher, inflation pressures may build up further. On the other hand, energy prices may fall back faster if the war ends swiftly and there is limited damage to infrastructure. At the same time, the krone could depreciate again should oil prices fall or financial market turbulence increase.

If the outlook indicates higher inflation than currently projected, a higher policy rate than currently envisaged may be required. If labour market conditions become weaker than projected or the outlook indicates a faster decline in inflation to target, the policy rate may become lower than currently envisaged. 

As from this policy rate decision, “Summary of the Committee’s deliberations” will also be published, as announced in News on 20 March 2026. 

Norges Bank will hold a press conference following the monetary policy decision in May 2026.