Norges Bank holds fire in June

Norges Bank holds in June following May’s hike: At its meeting on 18 June, Norges Bank left its sight deposit rate at 4.25%. The hold had been penciled in by markets. This comes after May’s 25 basis point rate hike—the first in over two years.

Hold balances weakening economy against high inflation: In standing pat, Norges Bank judged that inflation—while still above the Bank’s 2.0% target—is running only slightly hotter than its March projections; price pressures are not sufficiently high to warrant back-to-back rate rises. Adding to this, there is still a lot of uncertainty about the impact on the economic outlook of volatile oil and import prices stemming from the Middle East conflict.

June pause doesn’t signal end of hiking cycle: The Bank said that the sight deposit rate will likely need to stay elevated for longer than previously expected, and that another hike cannot be ruled out if inflation remains above target. Accordingly, most of our panelists expect Norges Bank to hike rates by a further 25 basis points by year-end, while a minority see rates on hold. The speed with which energy flows resume via the Hormuz Strait following the end of the Iran war will be key to watch. The Bank will reconvene on 13 August.

Panelist insight: On the 2026 outlook, analysts at Nomura commented: “We expect guidance to continue to suggest the potential for a further increase in the policy rate this year. As the Iran war continues to cause elevated energy prices, policymakers will remain concerned about upward inflation pressures […]. In line with our expectation that Norges Bank will signal the likelihood of another rate rise this year, we now expect another 25bp policy rate rise in September.”

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