Inflation has risen rapidly over the past months and has been far higher than projected. The labour market is tight, but there are now clear signs of a cooling economy. Easing pressures in the economy will contribute to curbing inflation further out. 

“Inflation is markedly above our target of 2 percent, and there are prospects that inflation will remain high for longer than projected earlier. We are raising the policy rate with the aim of bringing down inflation,” says Governor Ida Wolden Bache.

Many will be facing a squeeze on finances given the rapid rise in prices at the same time as the policy rate is being raised. But a faster rate rise now reduces the risk of inflation becoming entrenched at a high level and thereby the need for a sharper tightening of monetary policy further out.

The policy rate has been raised from zero to 2.25% over the past year and monetary policy is starting to have a tightening effect on the Norwegian economy. This may suggest a more gradual approach to policy rate setting ahead. The projections in this Report are based on a rise in the policy rate to around 3 percent in the course of winter.

The future path of the policy rate will depend on how the economy evolves, and our projections are more uncertain than normal. If there are prospects that inflation will remain higher for longer than we now project, there may be a need for a higher policy rate. A more pronounced decline in inflation and activity than currently projected may reduce the need for rate increases.

Norges Bank will also hold a press conference following the monetary policy meeting in November.