Norges Bank signalled a more hawkish stance, with inflation pressures seen as wider than the energy shock. Its projections now fully price at least one rate rise, while ING expects one move due to its bearish oil and gas baseline and a downward-sloping EUR/NOK view.
After the meeting, 1-year NOK swap rates rose by nearly 10bp, adding to a +43bp increase since the start of the war. The move suggests markets were surprised by the tone and the stronger guidance towards rate increases.
The bank pointed to broad-based inflation risks and other factors that could keep inflation in place. It also warned that not raising rates could weaken the krone and reduce the effect of lower imported inflation.
Market pricing implies 16bp of tightening for May and 33bp for June. With some members favouring a hike at the latest meeting, May appears more likely than later.
The NOK swap curve indicates 60bp of tightening over the next year, and two hikes are possible, though ING’s base case remains one. The policy rate is 4.0%, and Norges Bank projects inflation peaking at about 3.5%, with downside risks for front-end NOK swap rates.
With Norway’s core CPI for February 2026 unexpectedly hitting 3.2%, concerns about persistent inflation are re-emerging. Brent crude holding steady above $95 a barrel only adds fuel to this fire, complicating the outlook for Norges Bank. This environment closely mirrors the broad-based price pressures we saw build up in early 2022.
We recall the bank’s surprisingly forceful commitment to rate hikes back in 2022, which caught many off guard and sent swap rates soaring. At that time, the committee explicitly noted that a weaker krone was an inflationary risk it would not tolerate. This historical precedent suggests the bank will again act decisively to defend the currency and curb imported inflation.
Given that the market is only pricing a 25% chance of a hike by the June 2026 meeting, there appears to be value in positioning for a hawkish surprise. Front-end NOK swap rates seem too low, presenting an opportunity for traders to enter payer swaps or buy short-term interest rate futures. We believe the risk is skewed towards a sharp upward repricing in the coming weeks, much like the 43bp move we saw in early 2022.
A hawkish repricing will almost certainly benefit the Norwegian Krone, as it did during the 2022-2023 tightening cycle. The recent drift upwards in EUR/NOK towards 11.50 looks vulnerable to a reversal. Options traders could consider buying NOK calls against the Euro to position for a downward move.
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