Norway: Norges Banks holds fire in May
At its meeting on 2 May, the Executive Board of Norges Bank unanimously decided to keep the policy rate unchanged at a 16-year high of 4.50%. The hold had been priced in by markets.
The decision to hold was primarily influenced by inflation remaining markedly above the target despite slowing down. Additionally, while inflation has been slightly lower than projected since March’s meeting, economic activity has overshot Norges Bank’s projections. Moreover, wage growth could be higher than initially projected, according to the Bank, which, coupled with a weaker krone, risks further complicating the inflation outlook.
Norges Bank’s forward guidance indicated that the policy rate is likely to remain at the current level “for some time ahead”. This stance is based on the assessment that the current policy rate is adequate to guide inflation to the target “within a reasonable time horizon”. However, the Bank added that it is prepared to adjust the policy rate if necessary. All of our panelists see the loosening cycle beginning this year, with the majority penciling in the first rate cut in Q4 and a minority in Q3. The next policy meeting is scheduled for 19 June.