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Norway interest rate rise: Norges Bank to keep hiking rates as inflation reaches 30-plus year high?

By Fitri Wulandari

Edited by Jekaterina Drozdovica

09:18, 14 September 2022

Norges Bank building in Oslo, Norway.
Norges Bank to keep hiking rates as inflation reaches 30-plus year highs – Photo: Shutterstock; Alexanderstock23

Norway’s central bank Norges Bank has pushed a faster than expected rate hike in August.

Instead of sticking to its plan for a 25 basis points (bps) rate hike, the bank opted to double that to catch up with surging inflation. As the inflation rate remains above its 2% target this year, will the Norway interest rate rise continue?

What is Norges Bank?

Norges Bank is Norway’s central bank. It was founded in 1816, two years after the country separated from Denmark and the union with Sweden. 

But, it wasn't until 2001, with the release of a new monetary policy regulation by the Council of State, that the bank was given the responsibility of setting key interest rates to maintain low and stable inflation. The target was set at 2.5%, but decreased to 2%, based on the 2019 Royal Decree.

There are three decision-making bodies at the Norges Bank: the Executive Board, the Monetary Policy and Financial Stability Committee, and the Supervisory Council.

The Monetary Policy and Financial Stability Committee is in charge of implementing policy instruments, such as the interest rates, to achieve monetary policy objectives. In Norway, the policy rate is the interest rate on banks' overnight deposits in Norges Bank up to a certain quota.  The committee sets the policy interest rate, also called the sight deposit rate, eight times a year. 

Other duties of Norway’s central bank include managing the country’s foreign exchange reserves and  the Government Pension Fund Global (GPFG) on behalf of the government. The GPFG is the world’s largest sovereign wealth fund, with a total asset of $1.268tn, according to SWF Institute.

Historical Norwegian interest rates 

Norges Bank held its policy rate at 0% from May 2020 to August 2021 as the country’s economy weakened amid Covid-19 pandemic. On 23 September 2021, Norway’s central bank lifted the policy rate by 25 basis points (bps) to 0.25% as it embarked on the gradual normalisation of its rate.

The bank noted an upswing in the economy as it gradually reopened. While the inflation rate was still low at the time, increased activity with the removal of Covid-19 restrictions and rising wage growth was expected to push inflation towards the 2% target, the Norges Bank said in a statement. 

It kept the policy rate at 0.25% until December 2021 when Norges Bank hiked it to 0.50%. The bank paused rate hikes in January and held the rate unchanged until March 2022 due uncertainty on the impact of Omicron variant, which sparked new virus outbreaks at the time.

The bank raised the rate by 25bps to 0.75% in March 2022, as Russia's invasion of Ukraine increased uncertainty about Norway's economic outlook. Price and wage inflation was higher than expected, plus rising wage growth and imported goods inflation were projected to drive up underlying price rises in the near future.

For the following three months until June 2022, Norges Bank kept the policy rate unchanged at 0.75%. However, the bank revised up its policy rate forecast and indicated that it would continue policy tightening until 2.5% in 2023. 

In June, the bank turned even more hawkish, raising the rate by 50bps to 1.25%. Soaring energy prices pushed up annual Consumer Price Index (CPI) inflation to 5.4% in May, more than doubling the target.

Interest rates in Norway, 2017 – 2022

Norway interest rate rise in August

Although at first Norges Bank indicated that it'll only hike by 25bps in August, it changed direction and went with a 50bps interest rate rise, bringing the policy rate to 1.75%. Norges Bank Governor Ida Wolden Bache explained the faster-than-expected hike with high inflation, which pressured the country’s economy. 

“Policymakers faced a choice between sticking to their previous guidance, or changing course and acting more forcefully on the basis of the latest data – a similar conundrum that the ECB (European Central Bank) faced a few weeks ago,” said James Smith, ING’s developed markets economist.

The European Central Bank (ECB) hiked its policy rate to 0.50% in July, ending the zero-rate regime, which had been in place since 2016. 

Smith added that “in practice, officials have concluded that front-loading hikes in this environment makes more sense”.

Surging inflation rate keeps Norges Bank on its toes

Norway’s inflation rate has climbed markedly from 3.2% in January, peaking at 6.8% in July, and eased in August driven mainly by high energy prices. Europe’s natural gas prices have hit record highs, mainly as Russia continued to cut its supply to retaliate for sanctions against its invasion of Ukraine. 

Norway’s inflation rate, 2021 - 2022


66,596.25 Price
-0.690% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00


19,526.60 Price
-1.140% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 7.0


3,490.37 Price
-0.590% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00


2,401.36 Price
-1.830% 1D Chg, %
Long position overnight fee -0.0198%
Short position overnight fee 0.0116%
Overnight fee time 21:00 (UTC)
Spread 1.20

In June, Norges Bank forecast inflation to reach 4.6% in 2022, before slowing to 2.7% in 2025. 

“Energy inflation has been plateauing over recent months, but low hydropower reserves and poor country connectivity means prices are likely to spike higher over the winter,” the economists said.

ING Group forecast inflation rate to average at 5.6% in 2022, easing to 4.3% in 2023 and 2.5% in 2024. 

Meanwhile, Fitch Ratings Norway inflation projection saw CPI to peak in 2022 at around 4.6% and decline in the coming years, but could remain above the 2% inflation target until 2024.

Energy sector shields Norway’s economy

While rising energy prices have triggered inflation, Norway also received higher revenue from oil and gas exports.

According to Fitch Ratings, Norway's GDP was expected to grow 3.4% in 2022, thanks to resilient domestic demand and strong exports from the offshore energy sector, which accounts for 21% of the Norwegian economy. Economic growth was expected to moderate to 1.6% on average in 2023 and 20254.

“The Norwegian economy is in a strong cyclical position in mid-2022…A large energy sector shields Norway from the direct adverse effects of surging European energy prices amid the war in Ukraine and sanctions against Russia,” Fitch Ratings analysts said.

Oxford Economics expected Norway’s GDP growth to average 3% in 2022, slowing to 2.3% in 2023.

Meanwhile, ING’s forecast showed that Norway’s economy could grow 3.1% in 2022, easing to 1.3% in 2023 and recovering slightly to 1.6% in 2024.

Labour market to stay tight

Data from Statistics Norway showed that the unemployment rate remained low at 3.2% of total labour force in June due to substantial labor shortages. The tight labour market has contributed to drive inflation due to higher-than-expected wage growth

“With intensified competition for labour, employers are willing to go to greater lengths to recruit people with the right skills. We expect wage growth to continue to rise ahead. New data also indicate that wage growth may have been somewhat higher earlier this year than we had assumed,” said Norges Bank Governor Ida Wolden Bache in the August speech.

The central bank revised up its wage growth forecast to 3.9%, from 3.7% in March. The bank’s survey showed the wage growth may hit 4.5% in 2023. 

Norwegian interest rate outlook 2022 and beyond

With inflation expected to remain high and the tight labour market to persist, what are the Norway central bank interest rate predictions?

Norges Bank indicated it may raise the policy rate to around 3% by summer 2023, before monetary easing. 

As of 13 September, ING expected Norges bank to raise its policy rate to 2.75% by the fourth quarter of 2022, and to 3% by the first quarter of 2023. It expected the Norway interest rate rise to pause and stay at the 3% level until the first quarter 2024, before lowering it to 2.50% in the final quarter of 2024.

Oxford Economics predicted that the Norwegian interest rate could average at 2.75% in 2022, rising to 3% in 2023. The economic research firm expected the Norwegian central bank interest rate to drop to 2.50% in 2024 and 2% in 2025.

“The pace at which Norges Bank has changed course in recent months suggests it is increasingly worried about defending its inflation fighting credentials. We expect the bank to stop hiking by H2 2023, at which point inflation should be showing material signs of decelerating,” Oxford Economics said in the note published on 23 August.

Fitch Ratings forecast Norway's central bank to keep raising its policy rate until it reaches 3% in 2023. 

Trading Economics projected the Norway central bank rate to reach 2.25% by the end of this quarter. For the long term, the economic data provider predicted Norges bank to lift the rate to around 3.25%  in 2023 and 2.75% in 2024.

Remember that analysts' predictions on Norwegian interest rates can be wrong and have been inaccurate in the past. You should always conduct your own research before trading, looking at the latest news of Norway’s economy, technical and fundamental analysis and a wide range of analyst commentary. 

Note that past performance does not guarantee future returns. And never trade money that you cannot afford to lose.


Are interest rates rising in Norway?

Norges Bank has been consistently raising its policy rate since December 2021 with a pause in January and May.

What is the current interest rate in Norway?

As of 12 September, the current policy interest rate in Norway was 1.75% and was expected to be lifted by 50 basis points (bps) at the 22 September meeting.

What is the mortgage rate in Norway?

As of 12 September, the average interest rate on residential mortgage loans was about 2.2% in Norway, which Norges Bank forecast to rise to 4.3%.

Markets in this article

Oil - Crude
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-2.298 -2.840%
Natural Gas
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2.1560 USD
0.026 +1.220%

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