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Norway inflation rate: Norges Bank under pressure to keep hiking rates as price rises stubbornly remain above target

By Nicole Willing

Edited by Valerie Medleva

10:11, 23 December 2022

Norges Bank building
Norway’s annual inflation was 6.5% in November, above Norges Bank’s target. Photo: Shutterstock; Alexanderstock23

The inflation rate in Norway retreated in November from the 35-year high seen in October, but remained above the Norwegian central bank’s target as prices continue to rise rapidly for domestic and imported goods.

Norway’s annual inflation was 6.5% in November, retreating from the 7.5% level reported in October and lower than the 7% that analysts had expected. However, the rate remained well above Norges Bank’s 2% target and the 5.4% it had predicted for the fourth quarter.

Norway inflation rate 5-year chart

What is driving inflation in Norway, and where do analysts expect the rate to move in the future? 

In this article, we look at the latest Norway inflation predictions and how those expectations will influence the central bank’s monetary policy.

How is inflation measured in Norway?

The rate of inflation refers to the rate at which prices for goods and services in an economy increase over time, which erodes purchasing power. Healthy inflation is considered to be around 2%, and central banks in many countries, including Norway, have set 2% as their long-term target to maintain price stability.

Inflation rises when demand for goods and services exceeds supply, which drives up the prices that suppliers can charge. Rising costs for inputs such as raw materials and components can also drive inflation as suppliers pass the higher costs that they pay on to customers to maintain their profits.

Inflation rates are measured by comparing prices for items in a basket of goods and services with their prices in previous months or years. Several different types of indices can be used to measure inflation, such as a consumer price index (CPI), retail price index (RPI), personal consumption expenditure (PCE) or the producer price index (PPI). 

The CPI is the mostly commonly used measure of inflation. Headline CPI inflation refers to the overall price change, while core inflation excludes volatile prices, such as food and energy.

Each country’s statistics office compiles inflation data to inform government policy and provide information to the public. In Norway inflation rate data is collected and published by Statistics Norway. CPI adjusted for tax changes and excluding energy products (CPI-ATE) is used as a core inflation measure of the underlying growth in consumer prices.

Norway’s inflation rate history shows that the long-term average has trended above the 2% target, coming in at 4.5% since the 1990s. But more recently, inflation dropped to 0.7% in March 2020 and again in November of that year as Covid-19 lockdown restrictions pulled down demand. 

Prices have since increased rapidly, up from 2.5% at the start of 2021 and 3.2% in January 2022 to over 5% in April and 6% in May, peaking at 7.5% in September.

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Norges Bank indicates further rate hikes for inflation control

Norges Bank, the central bank of Norway, has raised the country’s key policy interest rate by 225 basis points (bps) this year in an attempt to slow the rate of inflation. The most recent increase was a 25 bps rise to 2.75% on 14 December – its highest level since 2009. 

“High energy prices have been a key driver of inflation, but prices are rising rapidly across a range of goods and services, both for domestically produced goods and imported goods,” said Norges Bank governor Ida Wolden Bache in a speech following the monetary policy decision. 

“Inflation has been higher than projected and is expected to remain higher in the coming months than projected in September…. Price stability is crucial for maintaining a well-functioning economy. Many are now finding it challenging to cope with rapid and unexpected price increases. High inflation erodes purchasing power, and those with low incomes and tight margins are being hardest hit. Our aim is to reduce inflation by raising the policy rate.”


Bache noted that inflation also remains above long-term trends in Norway’s trading partners, although rates may have peaked in countries such as the US. Central banks around the world have raised their interest rates to the highest levels in more than a decade, which paired with the high inflation could lead to weak economic growth.

“The future policy rate path will depend on economic developments. Most likely, the policy rate will be raised further in the first quarter of next year. If the economy evolves as anticipated, the policy rate will be around 3 percent next year. This implies a mortgage rate of between 4 and 4½ percent,” Bache added, which could tighten Norwegian household consumption.


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In Norway, as in Sweden, “households are mostly homeowners and indebted at variable rates. This limits the possibility of raising rates without impacting the economy too much”, according to analysis by French financial services firm BNP Paribas.

One approach that Norges Bank has taken to reduce inflation without raising interest rates further is to cut its foreign exchange purchases.  

The central bank converts excess petroleum revenues in Norwegian krone into foreign currencies, primarily the US dollar and euro, on behalf of the country’s finance ministry, which are then held by the Government Pension Fund Global (GPFG). 

Norges Bank surprised foreign exchange markets by announcing that it would reduce lower daily currency purchases for a second consecutive month in December to NOK1.9bn, from NOK4.3bn in October and NOK3.7bn in November.

The USD/NOK exchange rate has retreated by almost 10% since the end of September as the US dollar has retreated, while the Norwegian government has moved to support the krone and reduce the cost of imported products.

Live USD/NOK chart

According to Francesco Pesole, FX strategist at Dutch bank ING:

“Norges Bank and the Finance Ministry may want to offer some support to NOK via lower FX purchases, with the aim of reducing the need for direct monetary policy action (rate hikes) to fight inflation. We could see Norwegian authorities keep FX purchases lower throughout 2023 for this reason, which would be a positive development for NOK.” 


What is Norway’s expected inflation rate for 2023? Will the pace of price increases slow down further or will it remain high?

Norway inflation rate outlook from analysts

The official Norway inflation forecast from the central bank indicates that “inflation is projected to remain high in the near term but will begin to drift down in the course of next year and approach the inflation target further out. Household consumption is likely to decline next year, and unemployment edges up, albeit from a low level. The outlook is more uncertain than normal. The economy has been hit by major shocks in recent years, and there may have been changes in economic relationships,” Norges Bank governor Bache stated.

“Inflation, as measured in the Consumer Price Index (CPI), is expected to be 5.8 per cent in 2022. Next year, price growth is expected to be 4.9 per cent, but the calculations show a sharp fall towards the end of the year,” according to Statistics Norway researcher Thomas von Brasch. 

“The primary uncertainty factor associated with next year’s consumer price trends is which direction energy prices will go.”


FocusEconomics panellists expect Norway’s inflation rate in 2023 to be slightly below that level at 4.3%, which was up by 0.4 percentage points from their previous estimate. The panellists expect Norway’s inflation rate to decline towards the Norges Bank target and average 2.3% in 2024. 

At the time of writing 22 December)(, the Norway inflation rate forecast from economic data provider Trading Economics showed price increases dropping from 6.2% by the end of the quarter to 1.7% in 2023 and 1.4% in 2024, based on its econometric models.

If you are looking to use Norway inflation rate projections to inform your trading strategy, keep in mind that macroeconomic volatility can cause rapid fluctuations in prices and analysts can get their forecasts wrong.

We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.


What is the current inflation rate in Norway?

Inflation in Norway moved down to 6.5% in November from a 35-year high of 7.5% in October, according to the country’s statistics bureau.

Has inflation been going up or down in Norway?

Norwegian inflation has been rising over the past two years, but showed signs of peaking in October. The central bank has moved to limit inflation through interest rate hikes and lower foreign currency purchases to support the value of the krone.

Why is inflation so high right now?

The inflation rate in Norway has climbed since 2020 on high international energy and food prices and higher costs for imported goods on a weaker Norwegian krone.

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