Norway's central bank has opened the door to interest rate increases this year, even discussing immediate action to curb inflation, though it ultimately decided to hold rates unchanged.
On Thursday, officials maintained the key deposit rate at 4%, a move that aligned with the forecasts of all 12 analysts surveyed by Bloomberg. However, policymakers indicated that a rate hike "would most likely be appropriate," abandoning their previous schedule, which had projected three cumulative rate cuts by the end of 2028, at a pace of one per year.
"Uncertainty is higher than normal due to the war in the Middle East, but the committee assesses that it will likely be appropriate to raise the policy rate at one of the next few monetary policy meetings," Governor Ida Wolden Bache said in a statement.
A discussion memo released alongside the decision revealed that officials had actually debated whether to raise rates in March. In the end, they unanimously agreed to hold off for now but adjusted their policy stance accordingly.
"During the deliberations, some members emphasized in particular that inflation has been above the target for a long time and that rising commodity prices are adding to inflationary pressures," the memo stated. Following previously communicated principles, the memo did not specify which members held this view. "These members were concerned that inflation expectations could rise and considered this an argument for raising the policy rate now."
This decision places Norway's central bank at the forefront among developed-economy peers, which are shifting from a bias toward rate cuts to a potential tightening of policy in the wake of the Iran crisis. Last week, European Central Bank officials began discussing the possibility of raising rates as early as next month. The U.S. Federal Reserve, meanwhile, has signaled that any rate cuts remain a distant prospect.
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