Norway skyline at night

Norway Monetary Policy December 2023

Norway: Norges Bank surprises markets and resumes tightening cycle in December

At its last scheduled meeting of 2023 on 13 December, the Executive Board of Norges Bank unanimously voted to resume the tightening cycle and hike the policy rate by a further 25 basis points, raising it to 4.50%. The move, which came on the heels of November’s hold, largely surprised markets as another hold had been more widely anticipated. It brought the cumulative rate increase since September 2021 to 450 basis points.

The decision was driven by the Bank’s assessment that, despite the ongoing downward trend in price pressures and inflation in November coming in below September’s expectations, inflation remains “markedly above target”. In addition, the Norwegian krone has been weaker than projected, and wages are forecast to continue growing. Meanwhile, Norges Bank noted that the employment rate is high, although slightly lower than the Bank’s September projection. The Bank considers the current policy rate adequate to bring inflation back to the 2.0% target within a “reasonable time horizon”.

Norges Bank hinted it will hold fire when it convenes next on 24 January. In its communiqué, Norges Bank’s forward guidance stated that monetary policy is likely to remain tight “for some time ahead”, likely until autumn 2024. From then onwards, when inflation falls and economic conditions allow, the Bank will kick-start its loosening cycle. That said, the Bank stated that it will not hesitate to hike the policy rate further if inflation remains higher for longer. Most of our panelists expect the first rate cuts as early as Q2 2024.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest