Norges Bank left its policy rate unchanged at 4.25% in June, in line with expectations, while indicating that further tightening may still be necessary as inflation remains uncomfortably high. Governor Ida Wolden Bache noted that rising business costs are likely to keep price pressures elevated and signaled that the bank could raise rates again at one of its upcoming meetings.
The central bank highlighted that inflation has been above target for several years, even as economic activity has eased slightly. It also emphasized that uncertainty remains elevated, particularly due to the conflict in the Middle East and its potential effects on energy markets. Although oil and gas prices have declined since March, the possible reopening of the Strait of Hormuz could help reduce external price pressures further.
In its updated projections, Norges Bank now expects the policy rate to edge slightly above 4.5% by the end of the year. Inflation is forecast to gradually move down toward the 2% target by 2029, though the future interest rate path will continue to depend on how inflation and labor market conditions evolve.
