Key Takeaways
- Norges Bank raised its policy rate by 25 basis points to 4.25%.
- The central bank warned that higher oil and commodity prices could push inflation higher.
- Markets see limited chance of near-term easing and still price further tightening this year.
Norges Bank raised its policy rate from 4.00% to 4.25% at its May meeting, citing persistent inflation pressures and growing uncertainty surrounding the war in the Middle East.
The move was unexpected for many, with consensus forecasts pointing to an unchanged rate. However, market pricing ahead of the decision had already reflected some uncertainty, assigning roughly a 50/50 probability to a hike.
“The Committee judged it appropriate to raise the policy rate at this meeting. Inflation is too high and has run above target for several years,” says Norges Bank Governor Ida Wolden Bache.
The central bank said the outlook for the Norwegian economy has not changed materially since its last meeting in March, but stressed that geopolitical developments continue to cloud the inflation outlook. Oil prices remain elevated as shipping disruptions through the Strait of Hormuz persist despite a temporary ceasefire between the US and Iran, while other commodity prices have also increased.
Middle East War Keeps Inflation Risks Elevated
Norges Bank warned that higher energy and commodity prices could add to already persistent inflation pressures. Overall external price pressures were assessed to be slightly stronger than expected in March, even as gas prices have declined somewhat.
The central bank also pointed to stronger-than-expected wage growth prospects as a factor behind the decision to tighten policy further.
“The main message from Norges Bank is that inflation pressures remain too strong,” says Karine Alsvik Nelson, macroeconomist at Handelsbanken. “Inflation was already too high before the escalation in the Middle East, and with wage growth remaining elevated, it will take time to bring price growth back to target.”
Stronger Krone Helps Offset Imported Inflation
While inflation risks remain elevated, Norges Bank highlighted that the Norwegian krone has strengthened since March, which should help dampen imported inflation pressures. The decision triggered an immediate strengthening of the Norwegian krone, with EUR/NOK falling towards 10.87.
“We note that Norges Bank put emphasis on market pricing implying more hikes than the March rate path, and that the krone could weaken if the Bank did not deliver,” says Oddmund Berg, senior economist at DNB Carnegie.
“This could become an important factor going forward, especially if the Middle East conflict were to be resolved and energy prices declined, weighing on the NOK,” he adds.
Will Norges Bank Raise Rates Again in 2026?
The central bank reiterated that its March rate path implied the policy rate could rise further to between 4.25% and 4.50% by the end of the year.
“The monetary policy outlook does not appear to have changed materially since March, but the war in the Middle East is still causing substantial uncertainty about the economic outlook,” Wolden Bache said.
Handelsbanken maintain their view that Norges Bank will raise the policy rate once more, reaching 4.50% in September. SEB also expects another rate hike, but are unsure of the timing.
“Norges Bank guidance—or lack of it—keeps the door open for a back-to-back move in June although a more gradual approach appears favored at this stage," say Erica Dalsto and Marthe Eide of SEB.
The Key Norges Bank Interest Rate Decision Dates
- June 18, 2026
- Aug. 13, 2026
- Sept. 24, 2026
- Nov. 5, 2026
- Dec. 17, 2026
