Norwegian Monetary Policy Committee

The deposit rate was raised by 25 bps.

• Current: 4.5%
• Previous: 4.25%

The market was not certain about Norges Bank’s decision, although most analysts leaned toward a 25 bps hike. It is justified mainly by CPI inflation, which remains clearly above the target of around 2% (most recently 3.3%), and by wage growth of about 4.5%. Wage growth significantly outpacing productivity growth in the economy, combined with a strong labor market (unemployment rate at 4.5%), prompted policymakers to raise rates. At the same time, it is worth remembering that Norway’s latest quarterly GDP growth was only 0.3%, indicating very weak momentum, though not yet a recession. This points to moderate monetary tightening, but with limited scope for further hikes due to relatively weak economic growth.