“Whether additional tightening will be needed depends on economic developments. There will likely be one additional policy rate hike, most probably in December”, says Governor Ida Wolden Bache.

Inflation is high and markedly above the 2 percent target. Persistently high inflation imposes substantial costs on society. The Committee judges that a somewhat higher interest rate is needed to bring inflation down to target within a reasonable horizon. 

Growth in the Norwegian economy has slowed, but the labour market remains tight. Business costs have increased considerably in recent years, and labour costs are expected to increase more than projected earlier. This will contribute to keeping inflation elevated ahead. The longer inflation remains elevated, the greater the risk of it becoming entrenched. It may then prove more costly to bring inflation down again at a later stage. On the other hand, the policy rate has been raised significantly over a short period of time, and monetary policy is now having a tightening effect on the economy. The Committee does not want to raise the policy rate more than is necessary to tackle the high level of inflation.

The policy rate forecast has been revised up a little compared with the June 2023 Monetary Policy Report and indicates that the policy rate will lie around 4.5 percent through 2024.

“There will likely be a need to maintain a tight stance for some time ahead”, says Governor Ida Wolden Bache. 

There is uncertainty about future economic developments and the extent of the tightening effect of monetary policy at this juncture. If pressures in the economy persist or the krone turns out to be weaker than projected, inflation could remain high for longer than currently envisaged. In that case, we are prepared to raise the policy rate to a further extent than we project at present. If there is a more pronounced slowdown in the Norwegian economy or inflation declines more rapidly, the policy rate may be lower than currently envisaged.

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