Norges Bank leaves rates unchanged at 4.25%, as expected; it will likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings

Governor Bache:

• “Inflation is too high, and the rapid rise in business costs in recent years will contribute to keeping inflation elevated ahead. New information indicates that inflation pressures are slightly stronger than we had anticipated earlier."
• "We expect that a somewhat tighter monetary policy stance will be needed to bring inflation down to target within a reasonable time horizon. If developments turn out as currently envisaged, the policy rate will be raised at one of the forthcoming monetary policy meetings.”

Middle East:

• There is substantial uncertainty about the economic outlook. In recent days, news has come in that the United States and Iran have agreed on a memorandum of understanding that provides for the opening of the Strait of Hormuz.
• If energy markets normalise quickly, external price pressures may prove weaker than currently assumed.

Inflation Forecast:

• Sees 2026 core CPI 2.8% (prev. forecast 2.8%).
• Sees 2027 core CPI 3.2% (prev. forecast 3.3%).
• Inflation to reach 2.0% target in 2029.

Policy Forecast:

• "The policy rate forecast is a little higher than in March and is just above 4.5 percent at the end of the year."
• Sees 2026 policy rate at 4.3% (prev. 4.2%).
• Sees 2027 policy rate at 4.4% (prev. 4.2%)
• Sees 2028 policy rate at 3.8% (prev. 3.7%)