MNI NORGES WATCH: Hold, Possible Rise In Year-End Rate Path

The Norges Bank is set to hold its policy rate at 4.25% on Thursday, as attention focuses on whether and to what degree it revises its policy rate path upward.

The most recent rate path, published in March, saw end-2026 rates at 4.35%. The Norges Bank increased its policy rate by 25 basis points in May.

Several analysts suggest that the path could point to a policy rate at or above 4.40% by the end of the year, reinforcing the hawkish message the Bank has sent in the past few meetings, perhaps even as the back end of the rate path could be revised downward.

After the May decision, Governor Ida Wolden Bache told Norway’s parliament that the "latest policy rate forecast in March implied the potential need for further tightening of monetary policy later this year, but at present we do not foresee a pronounced increase in the policy rate."

The policy statement may pivot to a more active stance, perhaps with language echoing that in March, when the Bank said it would "likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings."

May inflation on the target CPI-ATE measure was 3.4%, above both the 3.2% consensus estimate and the Bank's own 3.3% forecast.

Wolden Bache told MNI after the May decision that, despite sticky inflation, the 2% target remains credible but that she wants to avoid promising any specific move.

"The risk that something is interpreted as a promise is, of course, something we do want to avoid in a situation where uncertainty is unusually high," she said. (See MNI INTERVIEW: Norges Bank Hike Not Just About Oil - Governor)