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June 18, 2026 - 10:54
3 minutes
(Bloomberg) — Norway’s central bank kept borrowing costs steady but sought to prepare investors for more tightening to calm some of the strongest price pressures in the region.Norges Bank left the deposit rate at 4.25% on Thursday, in a decision that was predicted by all 17 analysts in a Bloomberg survey, though seen by some as a close call.Officials signaled that they will follow up last month’s hike with another move in due course, but didn’t specify exactly when that might transpire. Their outlook for borrowing costs is “a little higher” than in March, with the rate landing “just above” 4.5% by the end of the year.The policymakers “clearly guide towards a third-quarter hike with a probability overweight for September,” said Kristoffer Kjaer Lomholt, head of FX and corporate research at Danske Bank A/S. “They leave open the door for another hike in December but only at a 20% probability.”The central bank’s numeric rate projections showed a rise in average rate to 4.55% by the final quarter of 2026, from 4.35% seen in March, and to 4.20% in the fourth quarter of 2027 from 3.98% projected earlier.The krone, the best performer this year among the group of 10 major currency jurisdictions, was little changed following the announcement. It traded at 11.0626 against the euro, close to a two-month low.Traders in overnight swaps now price in 27 basis points of tightening by the September meeting, versus 22 basis points seen on Wednesday.In recent weeks, Norges Bank officials have been signaling a sense of alertness over inflation, which has exceeded their 2% target for more than five years.The Middle East war meanwhile has increased demand for Norway’s fossil fuels, providing another potential area of price pressure from the domestic economy.“New information indicates that inflation pressures are slightly stronger than we had anticipated,” policymakers led by Governor Ida Wolden Bache said in a statement. “If developments turn out as currently envisaged, the policy rate will be raised at one of the forthcoming monetary policy meetings.”The decision cements Norway’s status as one of the region’s most hawkish jurisdictions among advanced economies. Last month, Norges Bank became the first major central bank in western Europe to deliver an interest-rate hike since the outbreak of the Iran war.On the eve of the announcement, the US Federal Reserve held borrowing costs steady in a decision that showed officials are getting closer to an increase there too. In neighboring Sweden, the Riksbank this week also opted to keep borrowing costs unchanged, and the Swiss National Bank did so on Thursday as well.–With assistance from Joel Rinneby, Anton Wilen, Christopher Jungstedt, Alastair Reed, Heidi Taksdal Skjeseth, Christian Wienberg, Frances Schwartzkopff and Charlie Duxbury.(Updates with analyst and market reaction, starting in fourth paragraph.)©2026 Bloomberg L.P.
