Update of Norges Bank's monetary policy strategy

The Monetary Policy and Financial Stability Committee has updated its monetary policy strategy. The strategy describes the Committee's interpretation of its monetary policy mandate. Moreover, the strategy sets out how the Committee will orient monetary policy in response to different shocks that could hit the economy.

The updated strategy is consistent with the Committee's conduct of monetary policy over recent years and does not entail a change in the conduct of monetary policy. However, the monetary policy challenges are different today than when the strategy was first adopted in 2021. At that time, global interest rates and inflation had been low for an extended period. In recent years, the global economy has been characterised by high inflation and a significant rise in interest rates.

"The updated strategy articulates that the Committee interprets its mandate to mean that considerable weight shall be given to employment - also at times when inflation deviates significantly from the target", says Governor Ida Wolden Bache.

The rise in inflation in recent years is due to a number of factors, including higher imported goods inflation and a weaker krone exchange rate. The strategy further articulates that the extent to which monetary policy should react to changes in inflation does not depend on whether it can influence the source of the changes. The decisive factor is whether changes in individual prices are expected to be passed on to other prices and wages and lead to a broad change in consumer price inflation.

Climate change and measures to reduce greenhouse gas emissions will increasingly impact the global economy.

"Even though climate considerations are not part of the monetary policy mandate, climate transition is of considerable importance for economic developments and hence for monetary policy", says Governor Ida Wolden Bache.

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