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Norges Bank maintains its rate unchanged at 4.0% as expected; "it will likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings"

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MPR, Policy Rate

  • 2026: Q2 4.07% (prev. 3.92%), Q3 4.26% (prev. 3.83%), Q4 4.35% (prev. 3.71%)
  • 2027: Q1 4.30% (prev. 3.57%), Q2 4.26% (prev. 3.45%), Q3 4.12% (prev. 3.37%), Q4 3.98% (prev. 3.31%)
  • 2028: Q1 3.83% (prev. 3.26%), Q2 3.69% (prev. 3.24%), Q3 3.60% (prev. 3.22%), Q4 3.54% (prev. 3.20%)
  • 2029: Q4 3.40%

GOVERNOR BACHE

  • "...the outlook indicates that inflation will be higher ahead than previously projected"
  • "Uncertainty is greater than normal due to the war in the Middle East, but the Committee judges that it will likely be necessary to raise the policy rate at one of the forthcoming monetary policy meetings”

STANCE

  • The Committee judges that a tighter monetary policy stance is needed to return inflation to target within a reasonable time horizon.
  • The inflation outlook indicates that an increase in the policy rate will likely be required.
  • The Committee therefore wants to await further information on the prospects for inflation.

FUTURE POLICY

  • The future path of the policy rate will depend on economic developments.
  • If the outlook indicates higher inflation than currently projected, a higher policy rate than currently envisaged may be required.
  • If labour market conditions become weaker than projected or the outlook indicates a faster decline in inflation to target, the policy rate may become lower than currently envisaged.

MINUTES OF DELIBERATIONS

  • The Committee discussed whether the policy rate should be raised already at this meeting.
  • In the deliberations, some members placed particular emphasis on the fact that inflation has remained above target for a long time and that higher commodity prices are adding to inflation pressures

Context

Norges Bank has opted to maintain its policy rate at 4.0% as anticipated, signaling a hawkish outlook with the likelihood of rate hikes in future meetings due to rising inflation pressures. The adjustments to their future rate projections reflect an expectation of tighter monetary policy, influenced by greater uncertainty from geopolitical factors. This could suggest continued support for NOK and higher yields in the fixed income space as traders digest the implications for future inflation and economic developments.

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