Rate effective from 19 June 2026:

• Policy rate: 4.25%
• Overnight lending rate: 5.25%
• Reserve rate: 3.25%

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Email: presse@norges-bank.no

 

The introduction wias published when the press conference started at 10.30 am.

Monetary policy decision, 17 June 2026

At its meeting on 17 June, Norges Bank’s Monetary Policy and Financial Stability Committee decided to keep the policy rate unchanged at 4.25 percent. This is a summary of the deliberations and assessments at the meetings leading to the policy rate decision.¹ The analyses in Monetary Policy Report 2/26 summarise the basis for the assessments. The analyses in the Report are based on information in the period to 12 June. There have since been movements in energy and financial markets. The overall picture presented in the Report would not have been changed materially due to those movements. The monetary policy decision and the assessments are based on data up to the Committee’s meeting on 17 June.

International economy and financial markets

In its discussion of global developments, the Committee assessed that the growth outlook was little changed since March but noted that there was still uncertainty surrounding the global economic outlook. Energy and commodity prices rose sharply after the outbreak of the war in the Middle East and the closure of the Strait of Hormuz. Since the monetary policy meeting in March, oil and gas spot prices have fallen. Futures prices are also somewhat lower than in March and indicate that oil and gas prices will decrease further but remain higher over the next years than before the war erupted. At the same time, freight rates and prices for various other commodities, such as aluminium and copper, have risen further. External price impulses to Norwegian imports of consumer and intermediate goods appear to be slightly stronger than assumed in March.

Market-implied policy rate expectations have fallen a little since March both internationally and in Norway. Norwegian market rates are still slightly higher than the policy rate forecast in the March Report and indicate expectations of further monetary policy tightening in the course of autumn. Euro area interest rates have been raised, and the market has priced in rate hikes by several central banks ahead. The krone appreciated over spring but has weakened again in recent weeks and is now broadly in line with that assumed in the March Report.

In recent days, news has come in that the United States and Iran have agreed on a memorandum of understanding that provides for the opening of the Strait of Hormuz. The Committee remarked that it will likely take time before the production and supply of oil return to normal even if the Strait is opened. Some members expressed concern that persistently high oil and commodity prices could intensify inflation pressures in Norway. On the other hand, external price pressures may prove weaker than currently assumed if energy markets normalise quickly. The attendant effects on inflation in Norway will also depend on developments in the krone exchange rate.

Activity in the Norwegian economy and the labour market

The Committee noted that new labour market data pull in slightly different directions. Employment has increased further broadly as expected, and the number of job vacancies has risen somewhat in recent months. On the other hand, Norges Bank’s Regional Network contacts report that it has recently become easier to recruit. Registered unemployment has remained stable at 2.1 percent, slightly higher than projected in the March Report. According to the Labour Force Survey (LFS), unemployment has recently increased further. In recent years, LFS unemployment has risen most among younger age groups, reflecting an increase in the number of young registered job seekers. Members noted that there has now been an increase in unemployment across all age groups. It was also pointed out that figures for labour market flows could indicate that it has become a little more difficult for the unemployed to find work.

Activity in the Norwegian economy appears to be rising further, but the Committee noted that growth in activity in 2026 will likely be moderate and lower than projected in March. This can be seen in the context of slightly weaker-than-projected growth in the first quarter partly owing to slower growth in household consumption. Housing investment has also been lower than expected, and new home sales are still at a low level. Members noted that a host of Regional Network contacts reported that customers have become more hesitant owing to prospects for higher interest rates and stronger cost growth ahead. They nevertheless expect growth to pick up somewhat over summer.

In assessing capacity utilisation, the Committee also noted that fewer firms now report capacity constraints. Overall, new information indicates that capacity utilisation in the Norwegian economy is close to a normal level but is drifting down. Capacity utilisation appears to be broadly at the level projected in March. Some members pointed out that LFS data could suggest that the labour market is weakening more than other data would suggest, and that this creates uncertainty as to the degree of slack in the economy.

Inflation

The Committee gave special attention to the fact that inflation has remained elevated and broadly as projected. The 12-month rise in the consumer price index adjusted for tax changes and excluding energy products (CPI-ATE) was 3.4 percent in May. The overall consumer price index (CPI) rose by 3.1 percent. CPI inflation was pulled down by the reduction in fuel taxes. Domestically produced goods and services inflation has moderated slightly but remains elevated. At the same time, imported consumer goods inflation has edged higher in recent months.

In assessing the drivers of inflation, members remarked that external price pressures appear to be slightly stronger than previously assumed. Wage growth will likely be lower in 2026 than in 2025. The Committee noted that the outcome of the wage settlements appears to be in line with the projection of annual wage growth in the March Report. At the same time, both Norges Bank's Regional Network and Expectations Survey indicate somewhat higher wage growth expectations for 2027. The Committee gave attention to the fact that the rapid rise in business costs will likely contribute to keeping inflation elevated ahead. Some members also pointed out that inflation expectations for the coming years, as derived from the Expectations Survey, have increased slightly again.

The Committee was presented with a new empirical analysis of the effect of monetary policy on inflation in Norway. Members noted that a higher policy rate dampens inflation more in this analysis than in previous studies based on Norwegian data. At the same time, it was pointed out that the studies are not fully comparable, and that such estimates are highly uncertain.

Monetary policy stance

Members judged that the monetary policy stance is still having a restrictive impact on the Norwegian economy. The Committee was presented with an updated analysis of the neutral interest rate level, which is assumed to be the long-term level consistent with a balanced economy. Members noted that the analysis shows substantial uncertainty about the neutral rate level. A reasonable estimate of the neutral interest rate currently appears to range between 2.25 and 3.75 percent.

In considering the monetary policy trade-offs, the Committee placed emphasis on the fact that inflation has remained above target for several years. Members agreed that in such a situation a more forceful monetary policy reaction to signs of increased inflation pressures would be appropriate than in a situation where inflation is close to target. High inflation over time can lead households and firms to begin planning for greater inflation persistence when making decisions. Inflation may then become stickier. At the same time, members placed emphasis on avoiding a stance that could restrict the economy more than needed.

Members agreed that a restrictive monetary policy is needed to return inflation to target within a reasonable time horizon. New data suggest that the economic outlook has not changed materially, but that inflation pressures are slightly stronger than assumed in March. Members agreed that this could imply a somewhat tighter monetary policy stance. Some members expressed concern that the stance is not sufficiently restrictive to bring inflation down and argued in favour of raising the policy rate now. At the same time, those members, in line with the rest of the Committee, took into account the fact that the policy rate was raised in May and that the uncertainty surrounding the outlook could weigh in favour of awaiting additional data on economic developments. Other members expressed concern that a higher policy rate could restrain the economy too much. They gave weight to the fact that the economy is cooling, which will also reduce the risk of inflation remaining elevated.

All members agreed to support the decision to keep the policy rate unchanged now and to signal that it will likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings.

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Committee members in attendance: Ida Wolden Bache, Pål Longva, Øystein Børsum, Hilde C. Bjørnland and Steinar Holden 

 

¹⁾ The summary does not specify the number of members who express a particular view. Words such as “some”, “a few” and “others” may refer to one or more members.