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Norway Monetary Policy September 2022

Norway: Norges Bank delivers another 50 basis point hike in September, hints at more to come

At its 21 September meeting, the Executive Board of Norges Bank unanimously voted to increase the sight deposit rate by another 50 basis points, bringing it to 2.25%—its highest level since November 2011. The increase came on the heels of August’s 50 basis point hike and was priced in by markets.

The decision was driven by the acceleration of inflation, which moved further above Norge’s Bank’s 2.0% target in August and persistently exceeded expectations. The Bank added that it now sees inflation remaining high for a longer period than anticipated at its last meeting in August. Norges Bank stated that the rapid increase in rates, coupled with high inflation, will pressure consumers’ finances, but that the rate raises are necessary to lower the risk of high inflation becoming entrenched. That said, the Bank acknowledged signs the economy is cooling, which should soften inflation ahead.

In terms of forward guidance, Norges Bank stated that early signs of the desired impact of policy tightening are being noted. As such, the Bank hinted that it would now increase the rate in a more gradual manner. Norges Bank sees the rate hiked to 3.00% “in the course of winter” and has hinted at another rate increase at its next monetary policy committee meeting, scheduled for 3 November.

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