PUBLISHED June 28, 2026
According to the Norges Bank Monetary Policy and Financial Stability Committee’s June 2026 decision, Norway’s policy rate has been kept unchanged at 4.25 percent — but the central bank made clear that this is not the end of the tightening cycle. A further rate increase is expected at one of the forthcoming monetary policy meetings, as inflation remains persistently above target and business cost pressures show no sign of easing quickly.
Hold, But Not a Pause: The Signal Is Clear
At its meeting on 17 June 2026, the Committee decided to keep the policy rate unchanged at 4.25 percent. There is uncertainty about future economic developments, but the Committee’s current assessment of the outlook implies that it will likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings. Governor Ida Wolden Bache was direct: inflation has been above target for several years, business cost growth is keeping price pressures elevated, and new data suggest those pressures are slightly stronger than previously anticipated. The rate forecast published alongside the decision points to a policy rate just above 4.5 percent by year-end.
Inflation Still Running Too Hot
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. While CPI was partially held down by a reduction in fuel taxes, underlying inflation — particularly for domestically produced goods and services — remains elevated. Imported consumer goods inflation has actually edged higher in recent months, partly reflecting the global commodity price shock from the Middle East conflict. The Committee gave special attention to the fact that the rapid rise in business costs will likely contribute to keeping inflation elevated ahead.
Labour Market: Mixed Signals, but Cooling
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.
Labour Force Survey data show a further rise in unemployment, and members noted that the increase has recently spread across all age groups — not just younger workers as in prior months. The Committee’s overall assessment is that capacity utilization is close to normal but drifting down.
Economy Growing, But More Slowly Than Expected
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. Regional Network contacts report that customers have become more hesitant given the prospect of higher interest rates and stronger cost growth — though a modest pickup in activity is expected over the summer months.
The June decision was complicated by late-breaking geopolitical news. 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. If energy markets normalise quickly, external price pressures may prove weaker than currently assumed. The Committee noted that even if the Strait reopens, it will likely take time before oil production and supply return to normal. The net effect on Norwegian inflation will also depend on how the krone exchange rate evolves — a stronger krone would dampen import price pressures, a weaker one would amplify them.
The June decision was complicated by late-breaking geopolitical news. 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. If energy markets normalise quickly, external price pressures may prove weaker than currently assumed. The Committee noted that even if the Strait reopens, it will likely take time before oil production and supply return to normal. The net effect on Norwegian inflation will also depend on how the krone exchange rate evolves — a stronger krone would dampen import price pressures, a weaker one would amplify them.
The policy rate forecast is a little higher than in March and is just above 4.5 percent at the end of the year. With a policy rate in line with the forecast, inflation is projected to decline from 2027 and reach 2.0 percent in 2029. The economy is expected to cool, and registered unemployment is projected to edge a little higher to slightly above pre-pandemic levels. The Committee was divided on the question of whether to raise now or wait — some members argued for an immediate hike given stubborn inflation, while others preferred to allow the May hike more time to work through the economy before acting again.
Wage growth is expected to come in at 4.5 percent in 2026, broadly in line with the manufacturing sector norm. However, 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. Higher wage expectations are a key concern because they risk becoming self-fulfilling — if workers and firms embed higher inflation into their planning, the process of returning inflation to target becomes significantly harder.
Norway stands in a different position from most of its European neighbors. While Sweden, Germany, and Austria are all grappling with below-target or moderate inflation, Norway’s tight labor market, high wage growth, and energy export windfall have kept domestic price pressures well above the Riksbank’s peers. 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. The next rate hike — widely expected this autumn — will be Norway’s most consequential monetary policy moment of 2026.
The policy rate forecast is a little higher than in March and is just above 4.5 percent at the end of the year. With a policy rate in line with the forecast, inflation is projected to decline from 2027 and reach 2.0 percent in 2029. The economy is expected to cool, and registered unemployment is projected to edge a little higher to slightly above pre-pandemic levels. The Committee was divided on the question of whether to raise now or wait — some members argued for an immediate hike given stubborn inflation, while others preferred to allow the May hike more time to work through the economy before acting again.
Wage growth is expected to come in at 4.5 percent in 2026, broadly in line with the manufacturing sector norm. However, 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. Higher wage expectations are a key concern because they risk becoming self-fulfilling — if workers and firms embed higher inflation into their planning, the process of returning inflation to target becomes significantly harder.
Norway stands in a different position from most of its European neighbors. While Sweden, Germany, and Austria are all grappling with below-target or moderate inflation, Norway’s tight labor market, high wage growth, and energy export windfall have kept domestic price pressures well above the Riksbank’s peers. 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. The next rate hike — widely expected this autumn — will be Norway’s most consequential monetary policy moment of 2026.
