Domestic inflation is being maintained at a high level by increased costs, both in Norway and abroad. This year's wage settlement concluded with a norm of 4.4 per cent. At the same time, higher prices for energy and commodities are reflected in inflation among our trading partners.

“Inflation is still well above the inflation target. High wage growth and increased prices globally mean that it will take time for inflation to come down to 2 per cent," says Thomas von Brasch, researcher at Statistics Norway.

According to our projections, inflation, as measured by the consumer price index, will fall from 3.2 per cent this year to around 2 per cent in 2029. Wage growth is forecast to be 4.4 per cent in 2026 before gradually declining to 3 per cent in 2029. Annual real wage growth will thus be about 1 per cent in the years ahead.

Further interest rate increase this year

Norges Bank reduced the key interest rate by 0.5 percentage point in 2025. Following unexpectedly high inflation in early 2026, Norges Bank announced in March that the interest rate would probably be raised. In May the key policy rate was increased to 4.25 per cent.

“The high inflation means that we expect a further interest rate hike from Norges Bank this year. It could come on Thursday already," says Thomas von Brasch.

The policy rate is expected to be reduced gradually from the middle of 2027, as and when inflation shows clear signs of slowing. The policy rate is projected to be 3.5 per cent at the end of 2029.

The outlook for residential construction remains weak

Housing investment remained at a low level throughout 2025 after falling by around 25 per cent throughout 2023 and 2024. Investment fell slightly in Q1 this year. The most recent figures for sales of new dwellings and for housing starts do not suggest any increase in residential construction in the near future.

“The factors that have depressed residential construction are still in force. Higher interest rates and high construction costs are creating a demanding situation for both home buyers and developers," says Thomas von Brasch.

According to our projections, housing investment will remain virtually flat throughout 2026 before picking up next year. Resale home prices have risen moderately so far this year, but with wide regional differences and weaker developments in Oslo than in other major cities. The rise in house prices is expected to be about 4 per cent in both 2026 and 2027.

Employment growth is reducing unemployment

According to the Labour Force Survey (LFS), the unemployed accounted for 4.7 per cent of the labour force in 2026 Q1. The increase follows a decline in unemployment throughout the second half of 2025. Concurrently, unemployment registered by the Norwegian Labour and Welfare Administration (NAV) has been fairly stable, with the fully unemployed representing about 2.1 per cent of the labour force since May 2025.

Labour force participation is forecast to remain at a high level, but continued employment growth will help to push LFS unemployment down towards 4 per cent in 2029.

The Norwegian economy is expected to grow at virtually a normal pace

Growth in the Norwegian economy declined from the middle of 2025 and throughout Q1 this year, following a pronounced upswing from mid-2024.

“We expect both private and public consumption to contribute markedly to growth going forward. Household consumption is being boosted by continued real wage growth, while fiscal scope for manoeuvre provides latitude for high public demand," says Thomas von Brasch.

According to our projections, the mainland economy will develop at a virtually normal pace going forward, with growth of just on 1.5 per cent.

The conflict in the Middle East is fuelling inflation among our trading partners

As a result of the conflict in the Middle East, Norway’s trading partners are experiencing stronger inflation.

“Higher energy and commodity prices are increasing costs to households and businesses. This is pushing up inflation among Norway's trading partners, particularly in Europe,” says Roger Hammersland, researcher at Statistics Norway.

The inflation projection for the euro area has been revised up to 3.1 per cent for 2026. Inflation is then expected to abate and lie close to the European Central Bank’s target of 2 per cent.

Annual GDP growth among Norway's trading partners has averaged about 2 per cent since 2005. Growth is forecast to be 1.5 per cent in 2026 before rising towards 2 per cent in 2029.

The analyses in the report are based on information as of Wednesday, 10 June 2026.