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Norway’s central bank has held interest rates steady for a second consecutive meeting, signaling that it is in no hurry to ease monetary policy despite signs of slowing economic growth. Norges Bank kept its key deposit rate at 4%, reaffirming a cautious stance shaped by persistent inflationary pressures.
Why Norges Bank is standing pat
The decision was fully anticipated by markets, with all analysts surveyed by Bloomberg expecting no change. Policymakers maintained their guidance that borrowing costs “will be reduced further in the course of the coming year,” while emphasizing that any easing is likely to be gradual rather than aggressive.
Governor Ida Wolden Bache said the interest-rate outlook has changed little since September and that officials do not foresee a large reduction ahead. Underlying inflation, currently running at about 3%, remains the primary constraint on faster policy easing.
Inflation still above target
Sticky core inflation has prompted Norges Bank to pencil in only one quarter-point rate cut per year through 2028. While many economists had expected the first reduction in the second quarter of 2026, market pricing after the decision suggests growing doubt about even that timeline.
Officials warned that the weaker krone, which has depreciated since the September policy report, is adding to inflationary pressures. Cutting rates too quickly, they cautioned, could keep inflation above target for longer than desired.
Currency market reaction
The Norwegian krone strengthened modestly after the announcement, rising around 0.2% against the euro and rebounding from an eight-month low reached ahead of the decision. Still, the currency remains down roughly 2% versus the euro this year as investors price in slower growth and future rate cuts.
Against the US dollar, however, the krone has performed strongly, gaining nearly 12% in 2025 amid broader dollar weakness.
Growth outlook softens
Norges Bank lowered its forecast for mainland economic growth next year to 1.3% from 1.5%. At the same time, underlying inflation is expected to slow slightly faster than previously anticipated, with a 2.7% rate projected for 2026.
Despite this improvement, policymakers remain focused on balancing the risks of slowing growth against the need to ensure inflation returns sustainably to target.
Nordic and global backdrop
Norway’s decision aligns with a broader regional pattern. Sweden’s Riksbank also kept rates unchanged earlier in the day, signaling an extended pause. The European Central Bank is expected to hold its deposit rate at 2%, while the Bank of England is widely anticipated to deliver a rate cut later in the session.
As International Investment experts report, Norges Bank’s cautious stance underscores a commitment to price stability even as growth slows. For investors, this suggests relatively stable yields in Norwegian assets through 2026, with limited scope for rapid monetary easing unless inflation falls faster than expected.