Norges Bank raises interest rates to 4.25%

(Sharecast News) - Norges Bank lifted its key deposit rate on Thursday to 4.25% from 4.0%, confounding consensus expectations for no change as it pointed to "substantial uncertainty" about the economic outlook.

In a statement accompanying its first rate hike since 2023, the Bank said inflation is too high and there are prospects that inflation will remain elevated ahead. It pointed out that high inflation over time can lead firms and households to plan for persistently high inflation, making it more difficult to bring inflation down again.

Governor Ida Wolden Bache said: "The Committee judged it appropriate to raise the policy rate at this meeting. Inflation is too high and has run above target for several years. The information on the inflation outlook we have received in recent weeks supports the analyses we presented in March."

ING, which had pencilled in an out-of-consensus 25 basis points hike, said it now thinks a hold is more likely in June, "but risks remain on the hawkish side, with guidance still pointing to another potential rate increase by year-end".