Key Takeaways
- Consensus forecasts point to Norges Bank holding interest rates at 4.25%.
- Core inflation at 3.4% in May exceeded the central bank’s forecast.
- The updated rate path is expected to move from a roughly 50/50 probability of another hike to clearly signaling one additional increase before year-end.
Norges Bank is widely expected to keep its policy rate unchanged at 4.25% at its meeting on Thursday, June 18. The decision will be accompanied by a full Monetary Policy Report with updated forecasts and a new interest rate path, the first since March.
The Norwegian central bank lifted the policy rate from 4.00% to 4.25% in May, resuming tightening after an extended pause. At the time, the committee said the monetary policy outlook had not changed materially since March, when one to two rate hikes in 2026 were expected, with a projected peak in rates of 4.35% by September.
Will Norges Bank Raise Rates by September?
Investment bank DNB Carnegie had previously expected a second consecutive rate hike in June.
“We have changed our call after today’s Regional Network [report] and now think it is slightly more likely that Norges Bank will keep the policy rate on hold,” writes Kyrre Aamdal, senior economist. He describes the likely outcome as a “hawkish hold” that buys the committee time to assess developments before another potential hike.
Erica Dalsto, chief strategist Norway at SEB, expects a hold on similar grounds.
“We do not believe the inflation outlook to have changed significantly to motivate the committee to deviate from its guidance by delivering another rate hike already in June,” she writes.
Dalsto says that Norges Bank has become increasingly focused on avoiding unnecessary policy surprises, and that the March rate path already implied a policy rate of 4.25% by June. She expects that another hike to 4.50% will ultimately be warranted but that the timing remains highly uncertain, with the policy rate peak staying between 4.25% and 4.50%. Market pricing currently assigns a 12% probability to a June hike, rising to 72% by September.
Norges Bank Key Interest Rates
- Policy Rate: 4.25%
- Overnight Lending Rate: 5.25%
- Reserve Rate: 3.25%
Inflation Moving Further from Target
Economic data since May have pulled in opposing directions, though inflation remains the dominant concern. Core inflation (CPI-ATE) reached 3.4% year over year in May, 0.1 percentage points above Norges Bank’s projection. On a seasonally adjusted annualized basis, CPI-ATE has averaged 3.6% over the past two months.
Several alternative measures of underlying inflation suggest that price pressures remain broad-based. The central bank’s Regional Network raised its forecast for wage growth to 4.5% for 2026 and 4.1% for 2027, 0.2 percentage points above the March projection.
But mainland GDP, which excludes the petroleum and offshore shipping sectors, grew by just 0.2% quarter over quarter in Q1 well below Norges Bank’s 0.4% forecast, and Q4 growth was revised lower. The Regional Network reported output growth of 0.2% in the Q2, below the previous survey, with indicators of capacity utilization and labor shortages edging further down. Registered unemployment held steady at 2.1%, slightly above the central bank’s 2.0% forecast.
Handelsbanken estimates that new information since March will lift the rate path by approximately 15 basis points, driven primarily by stronger inflation and growth in unit labor costs, while lower capacity utilization pulls modestly in the other direction. Karine Alsvik Nelson, macroeconomist at Handelsbanken, writes that “we continue to see a meaningful risk that Norges Bank could raise rates already at this meeting” and that “market pricing likely understates the probability of a June hike.”
Kjetil Olsen, chief economist at Nordea, and Sara Midtgaard, senior macro and rates strategist, say the upward revision to wage growth expectations for 2027 is particularly concerning.
“We think Norges Bank therefore judges that the inflation problem is even bigger than thought,” they write. “As such, they are probably willing (or have to) make more damage to the economy to make sure inflation comes down toward the target within a reasonable time frame.”
Where Next for Interest Rates?
Handelsbanken expects the new interest rate path to clearly signal one additional increase before the end of the year, with a high probability attached to September. Nordea similarly anticipates a clear signal for a rate change in Q3.
Not all forecasters are as certain. Harald Magnus Andreassen, chief economist at SpareBank 1 Markets, told Finansavisen following the Regional Network that a June hike is effectively ruled out and that even the September increase is now uncertain, pointing to a Norwegian krone that has strengthened roughly 9% since the start of the year, well ahead of Norges Bank’s assumptions.
The finalized US-Iran deal, signed around the Monetary Policy Committee cut-off date, adds a further layer of uncertainty around commodity prices and the krone. SEB’s Dalsto expects the committee to “refrain from drawing too firm conclusions at this stage.”
Norges Bank Interest Rate Decision Dates:
- June 18, 2026.
- Aug. 13, 2026.
- Sept. 24, 2026.
- Nov. 5, 2026.
- Dec. 17, 2026.
The monetary policy announcement is due at 10:00 CEST on Thursday, June 18, with a press conference at 10:30 CEST.
