As expected, Norges Bank cut interest rates to 4.0% from 4.25%.
- The Committee projects that in the coming years the pace of rate cuts will be slower than suggested in June; most likely one cut per year over the next three years.
- Inflation has declined but still exceeds the 2% target; it is expected to return to target only in 2028.
- Monetary policy remains restrictive to prevent inflation from staying above target for too long or the economy from cooling excessively.
- The projected mortgage rate stands above 4.5% by the end of 2028.
- Unemployment is expected to rise slightly; output is close to potential, and economic growth for 2025 appears stronger than previously forecast.
- The rate cut is described as “cautious easing,” aimed at not straining the labor market while supporting the return of inflation to target in the medium term.
- There are significant risks tied to international trade, global uncertainty, and wage growth, which may affect the path of further rate cuts.
- The next monetary policy decision will take place in November 2025.
This is clearly a “hawkish” cut. The Bank signals a slower pace of easing — one cut over each of the next three years. Initially, NOK weakened against the dollar, but we are now seeing a continued decline.