Norway central bank keeps rates on hold, eyes hike

Norway's central bank kept its policy interest rate at 4.25% and plans to hike later this year to combat inflation, in line with analyst expectations.

Norway's central ​bank kept its policy interest rate ‌on hold ​at 4.25% on Thursday and reiterated that it plans to hike later this year to combat inflation, in line with ‌expectations in a Reuters poll of analysts. The Norwegian crown currency weakened to 11.06 against the euro by 0803 GMT, from 11.04 just before the announcement.

"It will likely be necessary to raise the ‌policy rate further at one of the forthcoming monetary policy meetings," the central bank said ‌in a statement. The central bank policy committee last month raised rates by 25 basis points to 4.25%, moving sooner than most analysts had expected to quell inflation driven by strong wage growth and high energy costs.

Annual ⁠core inflation ​rose unexpectedly in ⁠May to 3.4% from 3.2% in April, official data showed earlier this month, moving further away from the central ⁠bank's long-term target of 2%. Norges Bank's policy committee cut rates twice last year and in December signalled ​further cuts in 2026, but it has since changed course as inflation has held ⁠above 3%.

"We expect that a somewhat tighter monetary policy stance will be needed to bring inflation down to ⁠target ​within a reasonable time horizon," Governor Ida Wolden Bache said in a statement on Thursday. A hike was thus expected "at one of the forthcoming monetary policy meetings", she said.

The next ⁠policy meeting is held in August, followed by one in September. While all 26 economists in the ⁠Reuters poll expected ⁠no change in rates on Thursday, a majority predicted one more 25 basis-point hike later this year to 4.50%, most likely by the end ‌of the ‌third quarter.