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Norway Monetary Policy August 2023

Norway: Norges Bank meets market expectations and slows tightening pace in August

At its 16 August meeting, the Executive Board of Norges Bank unanimously voted to slow down the pace of its tightening cycle, delivering a 25 basis point increase to bring the policy rate to 4.00%. The move, which markets had priced in, followed June’s 50 basis point rise. The rate now stands at the highest level since late 2008.

The decision to hike was driven by both headline and core inflation remaining above target. Despite the impact of prior hikes on easing price pressures, Norges Bank deemed tighter policy necessary to bring inflation to its 2.0% target. That said, both inflation and activity have slowed broadly in line with the Bank’s expectations from its June monetary policy report, allowing for a smaller rate increase. Meanwhile, the Norwegian krone strengthened and was stronger than previously projected, also leading the Bank to slow its tightening.

Norges Bank’s forward guidance stated that, given the current assessment of the balance of risks, the policy rate will most likely be raised again at its next meeting, set for 20 September, with the decision to be announced the following day. The majority of our panelists have penciled in another 25 basis point hike in September.

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