Norway: Norges Bank holds fire in May but prepares for a June interest rate hike
Norges Bank kept the sight deposit rate unchanged at 1.00% at its monetary policy meeting on 9 May, as overwhelmingly expected by market analysts. At its previous meeting on 21 March, Norges Bank hiked the sight deposit rate to 1.00% from 0.75%. The Bank noted at the time that the sight deposit rate “will most likely be increased further in the course of the next half-year”. This message was reaffirmed on 9 May, with Governor Oystein Olsen stating that, “the outlook and balance of risks suggests that the policy rate will most likely be raised in June.”
May’s monetary policy decision came against a backdrop of persistently high inflationary pressures, with inflation edging down to 2.9% March (February: 3.0%) but remaining above Norges Bank’s 2.0% target for the fourteenth consecutive month. (After the monetary policy meeting took place, inflation in April was reported to be stable at 2.9%.) Although Norges Bank will have wanted to bring inflation closer to its target rate in May, it likely kept its finger off the rate-hike trigger due to the “uncertainty surrounding global developments”, which continues to cloud the outlook for the Norwegian economy.
The next monetary policy decision will be taken on 20 June.