Norway Raised Interest Rate by 25 bps to 2.75 percent, Highest Since 2009

Norway’s central bank, the Norges Bank’s Monetary Policy and Financial Stability Committee unanimously raised the policy benchmark interest rate by 25bps to 2.75% in its December 2022 meeting, in line with market expectations, and signaled a further rate hike in the upcoming meeting.  The bank has had five consecutive hikes since July, equaling the sharpest hike since 2002 and lifting the key rate to levels not seen since 2009, as the Committee noted that the latest inflation readings were well above the central bank’s target of 2%. 

Norway Norges Bank Headquarters Oslo

“The forecasts for the Norwegian economy are more uncertain than normal, but if things go as we now believe, the key policy rate will be around 3 per cent next year”, says Governor Ida Wolden Bache.

The Norwegian policy rate, now at its highest since 2009, is currently set to peak at 3% next year and could start falling in 2024, Norges Bank’s forecasts showed.

“This may suggest a more gradual approach to policy rate-setting ahead,” it added.

Norway benchmark interest rate

Market Reaction

The Norwegian Krone rose against the dollar following the decision with the USDNOK trading at kr 9.8839 +0.1656 +1.70% after. However, it was weaker against the Euro, with the EUR trading higher at kr 10.4735 +0.0922 +0.89%


Norway’s annual inflation rate eased to 6.5% in November 2022, from October’s 35-year top of 7.5%, and below the market forecast of 7%.

Norway CPI Inflation Rate
  • Cost increased at softer rates for housing & utilities (4.9% vs 7.2%); food & non-alcoholic beverages (12.7% vs 13.1%); transport (9.6% vs 10.8%); furnishings, household equipment & routine maintenance (7.6% vs 8.2%); communications (1.8% vs 2.5%) and recreation & culture (5.6% vs 5.9%).
  • Inflation increased for clothing & footwear (2.1% vs 1.6%). Meanwhile, the CPI adjusted for tax changes and excluding energy products, surged 5.7% year-on-year in November 2022.
  • On a monthly basis, consumer prices dropped 0.2%, after a 0.3% rise in October.

Norges Bank said in their statement; “Since the June Report, inflation has been higher than expected and appears to remain high for a longer period than projected earlier. At the same time, the labour market appears to be a little tighter than expected. On the other hand, the interest rate has been raised considerably in a short period of time and monetary policy has begun to have a tightening effect on the economy. The turnaround in the economy appears to be somewhat more pronounced than envisaged in September.”

The outlook is more uncertain than normal. The future policy rate path will depend on how the economy evolves.

Norway Oil Fund

A further example of this foresight is the ‘oil fund’ which began in 1996 when the oil revenue from the government was transferred to the fund for the first time. The mission of the fund is to provide financial wealth and stability for future generations of Norwegians once the oil revenues declines.

”The Government Pension Fund Global is saving for future generations in Norway. One day the oil will run out, but the return on the fund will continue to benefit the Norwegian population.” via Norway Fund

The next largest Sovereign wealth funds other than China are also oil and gas nations; UAE, China, Kuwait and Saudi Arabia

Largest Sovereign Wealth Funds (2017)

  1. Norway US$1trillion
  2. UAE US$828 billion
  3. China US$814,000
  4. Kuwait US$524 billion
  5. Saudi Arabia US$514 billion

Source: Norway, Sovereign wealth fund institute

Clearly the small nordic nation has been very successful in it’s investments and is prudent when comes to monetary policy.

The Fund is managed by Norway’s central bank, Norges Bank.  Norges Bank Investment Management ” aims to make the most of the fund’s two distinguishing characteristics, its long-term approach and its considerable size, to generate strong returns and safeguard wealth for future generations.”

The aim of the fund was diversification from oil and to invest in opportunity. “We invest in almost 9,000 companies and have investments in 77 countries.’ Says Norges Bank on their website.

Outside of Oslo Norges Bank has offices in Luxembourg, Tokyo, LONDON NEW YORK SINGAPORE and SHANGHAI to manage their investments. The spread gives you an idea of their focus.

Source: Norges Bank

From The Traders Community Research Desk