MNI BRIEF: Norges Bank Holds, Says May Stay On Hold For Longer

Norges Bank left its policy rate unchanged at 4.5% at its May meeting and stated that it may keep the policy rate on hold for quite some time and longer than it previously envisaged. (see MNI NORGES WATCH: Seen On Hold, No Hardening Of Sep Cut Steer)

The decision to hold policy steady was very widely expected, but the change in guidance to signal a longer plateau, when previously Governor Ida Wolden Bache had stated the first cut was likely to come in September, was a hawkish surprise, in part because the central bank will only complete a full forecast round for next month's meeting.

Norges Bank's policy statement said that there "may be a need to keep the interest rate up somewhat longer than we previously envisioned," which suggests a first cut late this year at earliest. While headline inflation was a bit below forecast the central bank noted that wage growth was stronger, the krone weaker and that rate expectations abroad had risen.