Norges Bank Lowers Interest Rate by 25bps

The Norges Bank reduced its key policy rate by 25bps to 4.0% in its September of 2025, aligned with what was expected by markets, and signaled that it will continue to reduce rates in the coming year if the economy develops as expected. It marked the second rate cut in five years following the brief pause in August. The bank's Committee noted that the current policy stance is restrictive and contributed to cooling the economy to dampen inflation. At the same time, unemployment has increased, warranting a lower interest rate to attend to economic growth following a prolonged period of high borrowing costs. The Committee noted that under current expectations, the policy rate is likely to gradually drop to the 3% level in upcoming years and the inflation rate is projected to steady close to 2% by 2028.