Norway: Norges Bank holds fire in May, hints at hike in June
At its 4 May monetary policy meeting, the Executive Board of Norges Bank unanimously voted to keep the sight deposit rate unchanged at 0.75%, where it has been since it was raised in March. The decision met market analysts’ expectations.
The decision to hold was driven by the “substantial uncertainty” surrounding the impact that of the war in Ukraine on the Norwegian economy. The Bank noted that, while there is a risk that inflation could accelerate further, the economic and financial impacts of a rapid increase in interest rates are uncertain.
In terms of forward guidance, Norges Bank hinted—as it had at its March meeting—that the gradual tightening of conditions will resume in June. The Bank affirmed that “if there are prospects of persistently high inflation, the policy rate may be raised more quickly than indicated by the policy rate forecast in the March Report”. The majority of our panelists continue to see the sight deposit rate ending the year at 1.50%.
The next monetary policy rate decision is set to be announced on 23 June.