The Norges Bank’s decision to hold the key policy rate at 4.00% in November 2025 follows a gradual easing from the 4.50% peak reached in September 2024. This pause comes amid moderating inflation and resilient economic growth, with the central bank balancing inflation control against growth risks. The rate cut cycle began in June 2025, with two 25 basis point reductions before stabilizing this month.

Drivers this month

• Inflation slowed to 3.10% YoY in October, down from 3.60% in September, easing pressure on monetary policy.
• GDP growth held steady at 1.20% QoQ in Q3 2025, supported by domestic consumption and oil sector investment.
• Labor market remained tight with unemployment at 3.40%, near historic lows.

Policy pulse

The 4.00% rate sits below the 4.50% peak but remains above the 12-month average of 4.30%, signaling a cautious approach to avoid reigniting inflation. Norges Bank’s inflation target of 2% remains the anchor, with current inflation still above target but trending downward.

Market lens

Immediate reaction: The Norwegian krone (NOK) strengthened 0.30% against the euro within the first hour post-announcement, reflecting market approval of the steady stance. Short-term government bond yields fell by 5 basis points, signaling expectations of a prolonged pause.

Norway’s core macroeconomic indicators show a mixed but broadly stable picture. Inflation has moderated from its 2024 highs, while growth remains positive. The labor market’s tightness continues to support wage growth, which could sustain inflationary pressures.

Inflation and growth trends

• Consumer Price Index (CPI) inflation eased to 3.10% YoY in October 2025, down from 3.60% in September and well below the 4.50% peak in early 2024.
• GDP expanded 1.20% QoQ in Q3 2025, consistent with the 1.10% average growth over the past year.
• Core inflation, excluding energy and food, remains sticky at 2.80% YoY, indicating underlying price pressures.

Labor market and wages

Unemployment at 3.40% is near the lowest level since 2019, with wage growth steady at 4.00% YoY. This dynamic supports consumer spending but also risks sustaining inflation above target.

Fiscal policy & government budget

Norway’s fiscal stance remains prudent, with the government budget surplus at 2.50% of GDP in 2025. Continued oil revenues support fiscal buffers, though spending pressures on social programs and infrastructure are rising.

Financial market yields have adjusted accordingly. The 2-year Norwegian government bond yield fell from 4.60% in September to 4.20% in early November. Breakeven inflation rates also declined from 2.90% to 2.50%, signaling market confidence in inflation moderation.

Market lens

Immediate reaction: NOK/USD rose 0.40% post-decision, while 2-year yields dropped 0.05 percentage points, indicating a dovish market interpretation despite the unchanged rate.

Looking ahead, Norges Bank faces a complex environment. Inflation is easing but remains above target, while growth is steady but vulnerable to external shocks. The central bank’s next moves will depend on incoming data and global developments.

Bullish scenario (30% probability)

• Inflation falls rapidly below 2%, allowing Norges Bank to cut rates further to 3.50% by mid-2026.
• Strong oil prices and fiscal support boost growth above 2% YoY.
• Currency strengthens, supporting import price moderation.

Base scenario (50% probability)

• Inflation gradually approaches 2.20% by late 2026, prompting a steady policy rate around 4.00%.
• GDP growth remains near 1.20% annually, with moderate wage pressures.
• Global uncertainties persist but do not derail the recovery.

Bearish scenario (20% probability)

• Inflation remains sticky above 3%, forcing Norges Bank to hike rates back toward 4.50%.
• Global slowdown and geopolitical risks depress oil prices and growth.
• Currency weakness exacerbates imported inflation.

Norges Bank’s November 2025 decision to hold rates at 4.00% reflects a balanced approach amid easing inflation and steady growth. The pause follows a measured easing cycle after a prolonged tightening phase. Going forward, the bank will weigh inflation risks against growth vulnerabilities, with global developments and oil prices playing key roles.

Financial markets have responded positively to the steady stance, with the Norwegian krone strengthening and bond yields easing. However, the central bank remains vigilant to inflation’s trajectory and labor market dynamics.

Investors and policymakers should monitor inflation data closely, alongside geopolitical risks that could impact Norway’s open economy. The Norges Bank’s cautious pause signals readiness to adjust policy as conditions evolve.