Norges Bank Holds Policy Rate at 4.25% for Second Straight Meeting, Warns a Hike 'May Still Become Necessary'

A Second Hold, Not a Change of Direction

Norges Bank's Monetary Policy and Financial Stability Committee decided on August 12, 2026 to keep the policy rate unchanged at 4.25%, matching the level set at its previous meeting on June 18. The decision on the countercyclical capital buffer rate, published at the same time, also left that rate unchanged at 2.5%. "Inflation has slowed and been lower than projected this summer. Slower inflation is welcome news, but inflation is still too high, and it is too early to conclude that the inflation outlook has changed materially. It may thus still become necessary to raise the policy rate," Governor Ida Wolden Bache said in the press release announcing the decision.

Inflation Slows, But the Bank Isn't Declaring Victory

In July, 12-month CPI inflation came in at 3.0%, and CPI-ATE — inflation adjusted for tax changes and excluding energy products, the measure Norges Bank leans on most for the underlying trend — was 2.7%. Both readings were lower than the Committee had projected in June. At that June meeting, the Committee's assessment was that a further rate hike would likely be necessary at one of its forthcoming meetings; the softer July data is what has pushed that decision out rather than off the table entirely.

Oil, Gas and the Krone

The Committee noted that the conflict in the Middle East is still creating uncertainty about the inflation outlook. Oil spot and futures prices have shown little change since June, while gas prices have risen somewhat. External price impulses to Norwegian imported goods overall have evolved broadly as expected. The Norwegian krone weakened earlier in the summer but has since appreciated again and is now broadly in line with the level assumed in the Committee's June projections.

The Rest of the Economy: Cooling Housing, Steady Unemployment

Capacity utilisation in the Norwegian economy appears to be close to a normal level but is drifting down, the Committee said. Both registered unemployment and labour force survey (LFS) unemployment have changed little in recent months. Prices in the secondary housing market fell markedly in July, and construction activity remains low — signs the Committee is watching as it weighs how much further restraint the economy actually needs.

Why the Bank Still Sees a Hike as Possible

The Committee judges that a restrictive monetary policy stance is still needed to bring inflation down to target within a reasonable time horizon, while stressing it does not want to restrict the economy more than needed. Inflation remains markedly above target, and the Committee flagged that the rapid rise in business costs in recent years will contribute to keeping inflation elevated ahead. Its concern: if high inflation persists long enough, households and firms may start planning around it, making it stickier and harder to bring back down. No new forecasts were prepared for this meeting. Monetary Policy Report 3/26 will be published together with the next policy rate decision on September 24, 2026.

Reader Q&A

Q: Did Norges Bank cut interest rates?

No — it held the policy rate at 4.25%, the same level set in June. A hold was widely expected given still-elevated inflation.

Q: Why does the bank say it might still raise rates if inflation is slowing?

Because inflation, at 3.0%, remains above target and has been elevated for years. The Committee wants more evidence the slowdown will last before ruling out a further hike.

Q: What is CPI-ATE and why does it matter?

CPI-ATE strips out the direct effects of tax changes and energy prices, which can swing sharply for reasons unrelated to underlying demand. At 2.7%, it gives the Committee a cleaner read on domestic price pressure than the 3.0% headline figure.

Q: When will we know more about the rate path?

Norges Bank's next policy rate decision, alongside a full new set of economic forecasts (Monetary Policy Report 3/26), is due September 24, 2026.