Norway Central Bank Raises Rate to 4.5 Percent to Tackle Inflation

The decision comes as the bank grapples with the challenge of curbing persistently high inflation, while also acknowledging signs of economic cooling.

"We see that the economy is cooling down, but inflation is still too high," the bank said in a statement. "An increase in the policy rate now reduces the risk of inflation remaining high for a long period of time. The policy rate will likely be kept at 4.5 percent for some time ahead."

The bank said that inflation in Norway has remained above its 2 percent target, albeit somewhat below the initial projections. Concurrently, business costs have surged over the past few years, and high wage growth is expected to continue.

The bank believes that the policy rate is now approaching the level required to bring inflation back to target within a reasonable time frame.

"In the short term, the forecast for the policy rate remains relatively stable, but it is expected to decrease somewhat in the long term. The current projection suggests that the policy rate will remain around 4.5 percent until the autumn of 2024, after which it will gradually decline," the statement said.

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