Norway Interest Rate

Norges Bank raises rates in May

Norges Bank delivers first rate hike in over two years: At its meeting on 6 May, Norges Bank raised its policy rate by 25 basis points to 4.25%, marking the first hike in over two years. The decision came sooner than the market had expected.

Persistent price pressures drive the hike: The decision was driven by inflation having remained above the 2.0% target for an extended period of time, with prospects of it staying elevated ahead. Wage increases agreed between manufacturing firms and trade unions in recent annual negotiations came in close to the Bank's March projection, pointing to sustained labor cost pressures. Additionally, persistently high energy prices due to the ongoing war in the Middle East add further upside risk to inflationary pressures, although a stronger-than-expected krone since March offers a partial offset.

Further tightening remains on the table: In the meeting, Norges Bank kept its policy rate forecast from March, which pointed to a peak of 4.25–4.50% by end-2026. Further tightening later this year therefore remains possible, contingent on how inflation and energy markets evolve. Most of our panelists expect Norges Bank to stand pat through the end of 2026, though a significant number foresees it hiking once. The next meeting is scheduled for 18 June.

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