Rate decision August 2025
At its meeting on 13 August 2025, the Committee decided to keep the policy rate unchanged at 4.25 percent.
Rate decision - press release
Policy rate kept unchanged at 4.25 percent
Norges Bank’s Monetary Policy and Financial Stability Committee decided to keep the policy rate unchanged at 4.25 percent at its meeting on 13 August. The economic outlook is uncertain, but if the economy evolves broadly as currently envisaged, the policy rate will be reduced further in the course of 2025.
“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.
Rate effective from 15 august 2025:
- Policy rate: 4,25 %
- Overnight lending rate: 5,25 %
- Reserve rate: 3,25 %
Contact:
Press telephone: +47 21 49 09 30
Email: presse@norges-bank.no
The Committee's assessment
Norges Bank’s Monetary Policy and Financial Stability Committee unanimously decided to keep the policy rate unchanged at 4.25 percent at its meeting on 13 August. The economic outlook is uncertain, but if the economy evolves broadly as currently envisaged, the policy rate will be reduced further in the course of 2025.
About the Committee’s assessment
The Committee’s assessment summarises the Monetary Policy and Financial Stability Committee members’ assessments that led to the monetary policy decision at the meeting on 13 August 2025. New forecasts have not been prepared for this monetary policy meeting. New information was assessed against the projections in Monetary Policy Report 2/25, which was published on 19 June 2025.
In the June 2025 Monetary Policy Report, the policy rate forecast declined to just below 4 percent at the end of the year and to about 3 percent towards the end of 2028. Registered unemployment was expected to increase slightly, while inflation was projected to move down and be close to 2 percent in 2028.
The operational target of monetary policy is annual consumer price inflation of close to 2 percent over time. Inflation targeting shall be forward-looking and flexible so that it can contribute to high and stable output and employment and to counteracting the build-up of financial imbalances.
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 global economy is marked by trade policy changes. Since the June Report, the US has imposed new tariffs on imports, which are somewhat higher overall than assumed in June. The tariffs implemented are expected to have little impact on inflation in Norway, in line with the assessments in the June Report. The direct effect of higher tariffs on growth in the Norwegian economy is also likely to be limited. Expectations of higher US import tariffs may have prompted a front-loading of activity in many countries. Economic growth among main trading partners has on the whole been a little higher than expected. The Committee noted that international forecasters have made only small changes to their growth forecasts for major jurisdictions over the summer. Consumer price inflation in the euro area is close to target, while inflation in other trading partner countries is still slightly higher than their targets. Oil and gas prices and prices for a number of other commodities have fallen since June.
There have been relatively small movements in financial markets over the summer. Major equity indices have advanced in a range of countries, particularly in the US. International interest rate expectations have overall shown little change. As expected, Norwegian interest rate expectations fell, and the krone depreciated after the publication of the policy rate decision in June. The krone weakened further at the end of June at the same time as oil prices fell, but the krone has since held largely steady.
Since the June Report, inflation has risen somewhat and overall been broadly as expected. The year-on-year rise in the consumer price index (CPI) was 3.3 percent in July, slightly higher than projected. CPI inflation adjusted for tax changes and excluding energy products (CPI-ATE) was, as projected, 3.1 percent. Inflation is primarily being driven by the rise in prices for food and services. The rapid rise in business costs in recent years will likely restrain disinflation ahead, but lower wage growth is expected to push down inflation further out. As provided in the Revised National Budget 2025, child daycare prices were reduced from 1 August 2025 and will thus be lower than assumed in the June Report. The reduction in child daycare prices will lead to lower 12-month inflation in the coming year and a modest improvement in household purchasing power but will probably have little impact on inflation further out.
New information since the monetary policy meeting in June indicates that activity in the Norwegian economy has been broadly as expected. Retail sales have increased further, and first-time car registrations have increased. Labour market developments appear to be in line with the projections in the June Report. Employment has risen further, and the number of advertised vacancies is still high. LFS data show a continued increase in unemployment. Due to a break in data series, there is uncertainty as to the interpretation of the number of registered unemployed. Based on the number of persons receiving unemployment benefits, which has increased a little recently, registered unemployment is assessed to have moved broadly as projected. In recent months, house prices have risen approximately as expected. New home sales are still low, but the rise in the number of housing start permits suggests that housing investment increased further in 2025 Q2. The Committee assesses based on new information that the output gap in the Norwegian economy is broadly as projected in the June Report.
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 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.
Ida Wolden Bache
Pål Longva
Øystein Børsum
Ingvild Almås
Steinar Holden
13 August 2025
Press conference - Introductory statement by Governor Ida Wolden Bache
Cautious normalisation of the policy rate
Introductory statement by Governor Ida Wolden Bache at the press conference following the announcement of the policy rate on 19 June 2025.
Chart: Policy rate held unchanged at this meeting
Norges Bank’s Monetary Policy and Financial Stability Committee decided to keep the policy rate unchanged at 4.25 percent. The economic outlook is uncertain, but if the economy evolves broadly as currently envisaged, the policy rate will be reduced further in the course of this year.
The central bank is mandated by government to ensure low and stable inflation. The operational target is inflation of close to 2 percent over time. At the same time, we are mandated to help keep employment as high as possible and to promote economic stability.
The central bank sets the policy rate eight times a year. Each rate decision is preceded by a thorough process, where the Committee meets multiple times. Norges Bank staff present analyses and alternative monetary policy stances. The Committee members always engage in thorough discussions, where the objective is to arrive at a decision that can be backed by all the members. The rate decision is published together with a summary of the discussions and the trade-offs made.
Chart: The policy rate was raised rapidly and substantially in recent years
The world economy has been hit by unusually large shocks in recent years, and we have had to navigate uncharted territory with regard to interest rate setting. After the outbreak of the pandemic and lockdown, we reduced the policy rate to a historically low level with the aim of dampening the downturn and preventing higher unemployment from becoming entrenched. When inflation surged in the wake of the pandemic, we tightened monetary policy rapidly and significantly. The interest rate increases have helped cool down the economy and reduce inflation.
Chart: Inflation has come down substantially from the peak
Inflation peaked at 7 percent and has since more than halved. Earlier this week, incoming data indicated that consumer price inflation is now down to 3.3 percent.
The inflation surge was triggered by an import price shock. Import prices have since fallen sharply, and a key driver of inflation in Norway is now the rise in prices for domestically produced goods and services.
Chart: The employment ratio is now higher than before the pandemic
When the economy recovered after the pandemic, unemployment fell to a very low level and the number employed increased markedly. As the economy cooled in recent years, unemployment increased again. This is confirmed by both the number of unemployed registered with the Norwegian Labour and Welfare Administration (Nav) and LFS data from Statistics Norway. While the Nav figures show that registered unemployment is now back to about the same level as before the pandemic, the LFS unemployment data indicate that unemployment has risen somewhat further. Either way, we see that the employment ratio is higher than in the period before the pandemic.
Chart: Cautious normalisation of the policy rate
The policy rate was held at 4.5 percent for a year and half. In June, we began a prudent easing of monetary policy. With a cautious normalisation of the monetary policy stance, we are paving the way for inflation to return to target without a strong increase in unemployment.
We place emphasis on being transparent about our assessment of the monetary policy outlook. When we publish the policy rate decisions, we also provide a verbal indication of our assessment of the monetary policy outlook going forward. Our signals about the monetary policy outlook are not promises. If the economy takes a different path than envisaged, the policy rate path may be adjusted.
In March, the inflation figures indicated that inflation was unexpectedly high. The decision to keep the policy rate unchanged in March did not come as a great surprise, whether for the financial market or those who closely follow the central bank. In June it was different. The decision to reduce the policy rate in June did come as a surprise to many.
We do not want to surprise economic agents. But our decision will always be based on our mandate and assessment of the outlook. In the period to the June meeting, underlying inflation fell more than expected. This reassured us that much of the increase in inflation earlier this year was temporary.
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. Excluding the volatile component energy prices, inflation has been as projected. The labour market also appears to have evolved as expected.
The US imposed new tariffs over the summer, which are overall a little higher than we had assumed in June. The tariffs could heavily impact some firms, but the direct effect on activity in the Norwegian economy will likely be limited, as is also expected to be the case with regard to inflation in Norway.
Chart: Krone exchange rate has shown little change over the summer
When I was here last year, the krone exchange rate received much attention. The exchange rate had weakened quite a bit over the summer months.
Measured by a weighted average of trading partner currencies, the exchange rate is now at about the same level as a year ago. But the exchange rate has varied against different currencies. Against the euro, the krone is a little weaker than a year ago, while it is stronger against the US dollar. Since the beginning of the year, the US dollar has depreciated against a host of currencies.
When we published the policy rate decision in June, the krone exchange rate depreciated – in line with what we had expected. In the following week, the krone weakened somewhat more at the same time as oil prices fell. Since that time, the krone exchange rate has held broadly steady, but is a little weaker than we had assumed in June.
Chart: Inflation down to target without a marked increase in unemployment
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. The job of tackling inflation has not been fully completed. But inflation has been significantly reduced from the peak, and with lower wage growth there are prospects that inflation will continue to decline. With lower inflation, household purchasing power is expected to continue to increase.
Our decision to start easing monetary policy does not mean that the Norwegian economy is faring poorly. But we do not want to restrain the economy more than needed. We expect the economy to expand at a moderate pace in the years ahead. After falling to a very low level, residential construction activity is now showing signs of picking up. On the other hand, the oil services industry, which has prospered in recent years, is expected to show slightly slower growth ahead.
The uncertainty surrounding the economic outlook is greater than normal, and the future path of the policy rate will depend on economic developments. With a rate path in line with the June forecast, inflation is projected to be around 2 percent in 2028, while unemployment is projected to increase a little.
The June forecast indicates a decline in the policy rate to about 3 percent in 2028. As such, we do not envisage a large decline in the policy rate, and we do not foresee a decrease in interest rates back to the levels seen in the decade prior to the pandemic.
The introduction will be published when the press conference starts at 10.30 am.
Countercyclical capital buffer
Countercyclical capital buffer unchanged at 2.5 percent
At its meeting on 13 August 2025, Norges Bank’s Monetary Policy and Financial Stability Committee decided to keep the countercyclical capital buffer rate unchanged at 2.5 percent.
About the countercyclical capital buffer
The countercyclical capital buffer is intended to strengthen banks’ solvency and mitigate the risk that banks amplify an economic downturn.
The countercyclical capital buffer is intended, in principle, to range between 0 percent and 2.5 percent. Norges Bank will normally set the buffer rate in the upper part of this range. If a downturn will or could cause a marked reduction in credit supply, the countercyclical capital buffer rate should be lowered. In the event of particularly high cyclical vulnerabilities, the countercyclical capital buffer rate may be set above 2.5 percent. If cyclical vulnerabilities recede significantly over time and the outlook for financial stability is good, the buffer rate may be reduced. Norges Bank sets the countercyclical capital buffer rate each quarter.
Heightened risk of shocks
The global economy is marked by uncertainty about international trade policies. There is a heightened risk of shocks that may impact the Norwegian financial system (see Financial Stability Report 2025 H1). Financial system vulnerabilities could amplify a downturn in the Norwegian economy and lead to bank losses.
Firms and households have ample access to credit
In Norges Bank’s lending survey for 2025 Q2, banks reported unchanged credit standards for firms and households, following credit easing for households in Q1 as a result of changes to the Lending Regulations. Household and corporate credit demand increased somewhat, and banks reported stronger competition. Banks expect unchanged credit standards and a slight further increase in demand in Q3. Bond market activity declined in April as a result of uncertainty about international trade policies but picked up again before summer. Credit premiums have fallen in recent months for firms with high credit ratings and are close to the average for the past ten years. In Norges Bank’s overall assessment, households and firms have ample access to credit.
Household credit growth has accelerated over the past year
High and rapidly rising debt can amplify economic downturns and increase the risk of financial crises. For a long period, debt rose faster than household income. In recent years, debt growth has been slower than income growth.
Should the debt-to-income ratio decline over time, the household sector could become less vulnerable to interest rate increases and income loss. Vulnerability may increase again if looser financial conditions result in rapidly rising house prices and debt.
Household credit growth has accelerated somewhat over the past year but has remained stable in recent months. Credit growth is normally closely linked to house price inflation, which was high at the beginning of 2025 but has since been moderate. Turnover in the secondary housing market has been high in recent months. New home sales are still at a very low level but the number of housing start permits has increased.
Stable prospects for commercial real estate
Following a sharp fall in 2023, estimated commercial property selling prices rose slightly towards the end of 2024 as a result of higher rents. Selling prices rose further in 2025 Q1 but without a corresponding increase in rents.
Higher interest rates in recent years have pushed up financing costs and reduced CRE firms' profitability. High employment and growth in rental income enable most firms to service higher interest expenses with current earnings.
CRE firms' profitability and property values will deteriorate if interest rates or risk premiums rise markedly or rental income proves markedly lower than expected (see Financial Stability Report 2025 H1). In that event, many CRE firms may face difficulties servicing debt.
Overall corporate sector solvency is strong. The share of bankruptcies among Norwegian firms has risen somewhat since the beginning of 2024 and is now close to the historical average. So far this year, the share of firms facing debt collection has been high, and the share of bankruptcies in Norwegian firms is expected to increase somewhat further in 2025, particularly in the real estate sector.
Buffer requirements strengthen financial system resilience to downturns
Norwegian banks are highly profitable and satisfy capital and liquidity requirements by a solid margin. Although banks’ corporate credit losses increased somewhat in 2024, they remain low. The solvency stress test in Financial Stability Report 2025 H1 shows that banks can absorb large credit losses, while still having the capacity to lend.
The countercyclical capital buffer rate of 2.5 percent helps maintain bank resilience. Resilient banks are important for ensuring that financial system vulnerabilities do not amplify downturns.
The Committee unanimously decided to keep the countercyclical capital buffer rate unchanged at 2.5 percent.
Ida Wolden Bache
Pål Longva
Øystein Børsum
Ingvild Almås
Steinar Holden
13 August 2025