Key Takeaways
- Most economists expect Norges Bank to hold at 4.00%, though a 0.25 percentage point hike remains a very real possibility.
- Recent data since March show a mixed but broadly in-line picture, with softer domestic activity offset by resilient inflation and wage outcomes.
- The timing of the next rate move remains uncertain, with markets and economists divided between a May or June hike.
Norges Bank is widely expected to keep its policy rate unchanged at 4.00% at its May meeting, in what is set to be an interim decision without updated forecasts or a new rate path.
At its March meeting, the central bank held rates but signaled a clear shift, stating that a hike would likely be appropriate at one of the coming meetings. The published rate path implied roughly a one-third probability of a move in May and two-thirds in June. Minutes from the meeting also showed that some policymakers had already favored raising rates.
Kyrre Aamdal, senior economist at DNB Carnegie, expects a hold but sees the decision as finely balanced. “We expect Norges Bank to keep the policy rate unchanged at 4.00% at the May meeting, although a 25bp hike is almost as likely,” he says. “The case for an unchanged rate rests on the March rate path pointing more clearly to June than May, and the development in short-term indicators. On the other hand, markets are pricing in around 16bp for May, and if Norges Bank is already aiming for a higher policy rate, the question is why wait? Moreover, energy prices have remained elevated and have even moved higher since March.”
Norges Bank Key Interest Rates
- Policy rate: 4.00%
- Overnight lending rate: 5.00%
- Reserve rate: 3.00%
Most Data Since March Support a Patient Norges Bank
Core inflation in Norway, as captured by CPI-ATE, which strips out energy prices and tax adjustments, came in at 3.0% year-on-year in March, in line with Norges Bank’s forecast. According to DNB Carnegie, the underlying details were mixed. Domestic core inflation came in softer than expected at 3.8% in the first quarter, below the central bank’s 4.5% projection, while imported goods inflation surprised on the upside.
Wage growth also aligned broadly with expectations. The negotiated wage norm landed at 4.4%, close to Norges Bank’s 4.5% assumption. Other activity indicators have also been softer than expected, with house prices, unemployment, and retail sales all below forecast.
Nordea economists Kjetil Olsen and Sara Midtgaard say incoming data since March has largely matched the central bank’s outlook, with the exception of a slightly stronger exchange rate. “A purely technical rate path is therefore somewhat lower than in March and points toward staying on hold now and hiking in June,” they say.
At the same time, they argue that some of the uncertainty that justified the March pause has eased. Inflation and wage outcomes have come in as expected, while oil prices have edged higher amid ongoing geopolitical tensions. “Norges Bank should therefore be even more confident that underlying inflation pressures will remain elevated,” they add.
Norwegian Inflation Pressures Predate Middle East Escalation
Geopolitical tensions in the Middle East have intensified in recent months, disrupting shipping through the Strait of Hormuz and pushing global oil prices higher. The move has fed through to inflation expectations and prompted markets to scale back previous rate cut bets from several major central banks to now pricing in further tightening. However, Norway’s inflation challenge was apparent even before the outbreak of the war.
“Even before the conflict, there were clear signs that price growth remained elevated, broad-based, and persistent. Without a firm monetary response, core inflation could drift even further away from target,” say Marius Gonsholt Hov, chief economist, and Karine Alsvik Nelson, senior economist, at Handelsbanken.
A broad range of underlying inflation measures all point in the same direction. Handelsbanken finds that “the decline in core inflation has stalled and, if anything, appears to have reversed,” with the persistent component of inflation remaining elevated since 2022-23.
Higher oil prices are adding to the complexity. Brent crude has been trading around USD 107–112 per barrel as disruptions in the Strait of Hormuz persist, supporting activity in Norway’s petroleum sector but at the same time reinforcing inflationary pressures.
“It may seem counterintuitive that we have lowered our GDP growth projections,” Handelsbanken’s Gonsholt Hov and Alsvik Nelson say. “However, this reflects strong underlying inflationary pressures, further amplified by higher energy prices. As a result, monetary policy must be tightened significantly to bring inflation back under control.”
Markets May be Overpricing a Second Hike
Against this backdrop, Handelsbanken expects Norges Bank to raise the policy rate to 4.25% in the second quarter and to 4.50% in the third, before easing gradually toward 4.00% over 2027–28. In a more adverse oil price scenario, the rate could peak closer to 4.75%.
Nordea and DNB Carnegie both expect a single hike to 4.25% before summer, most likely in June, with Nordea arguing that market pricing of two hikes before summer looks excessive.
“For Norges Bank to hike both in May and June, new information needs to come in pointing towards much stronger inflation pressures than anticipated, either by a significantly weaker NOK and/or much higher inflation readings for April and May. The market is pricing in a 50:50 chance of two hikes by June, we see this probability much lower and close to 0%,” say Nordea’s Olsen and Midtgaard.
Key Norges Bank Interest Rate Decision Dates:
- May 7, 2026
- June 18, 2026
- Aug. 13, 2026
- Sept. 24, 2026
- Nov. 5, 2026
- Dec. 17, 2026
Norges Bank’s Monetary Policy and Financial Stability Committee meets on Wednesday, May 6. The rate decision, the committee’s assessment, and the deliberation summary will be published at 10:00 CEST on Thursday, May 7.
