Norges Bank hikes rates by 25bps to 4.25% (prev. 4.00%); "The Committee judges that a higher policy rate is needed to return inflation to target within a reasonable time horizon"

Reason to hike: 

• “The Committee judged it appropriate to raise the policy rate at this meeting. Inflation is too high and has run above target for several years. The information on the inflation outlook we have received in recent weeks supports the analyses we presented in March”, says Governor Ida Wolden Bache.
• "The Committee judges that a higher policy rate is needed to return inflation to target within a reasonable time horizon".

Outlook:

• "The monetary policy outlook does not appear to have changed materially since the monetary policy meeting in March, but there is substantial uncertainty about future economic developments"

Inflation/Jobs: 

• Inflation is too high, and there are prospects that inflation will remain elevated ahead. High inflation over time can lead firms and households to plan for persistently high inflation. It may then become more difficult to bring inflation down again.
• In Norway, inflation has been broadly as projected. Twelve-month CPI inflation rose to 3.6% in March, while CPI inflation adjusted for tax changes and excluding energy products (CPI-ATE) was unchanged at 3%.
• "Labour market developments have overall been broadly as expected, and capacity utilisation still appears to be close to a normal level".

NOK:

• "The krone has appreciated and is stronger than assumed. A stronger krone will dampen imported price inflation".

Middle East:

• "The war in the Middle East is still causing substantial uncertainty about the economic outlook".