After unexpectedly low inflation in March, and a persistent downward trend in core inflation, price growth surprised on the upside in April, making us believe an interest rate cut is no longer on the agenda for Norges Bank. However, data suggest a lower path, and we expect the first rate hike to be pushed to Q4 next year.
Norges Bank’s forecast for the key policy rate in the Monetary Policy Report 1/13 in March implies a small probability of an interest rate cut in Q2 this year. However, this is more a technical possibility than anything else. According to Norges Bank, they foresee holding the interest rate unchanged at 1.5% before hiking it sometime between Q1 and Q3 next year. Economic developments since March indicate a lower interest rate path from Norges Bank in June, but we no longer expect them to cut the key policy rate.
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