Norway tightened again on Thursday, taking its key deposit rate to 4.5%. The call split forecasters: 11 of 21 in a Bloomberg survey expected a hike, with the rest looking for a pause.
Hours earlier, Sweden opted to stand pat at 1.75%, which remains the lowest benchmark in the European Union. The Riksbank also signaled that rate increases could start this year if prospects for inflation and economic activity remain intact as growth improves. Norway's move alongside Sweden's hold pushed the policy‑rate spread to the widest since 2008.
Norway has been among the quicker movers in this cycle, having already hiked in May. By contrast, Switzerland's central bank on Thursday kept its main rate at zero.
Norges Bank expects borrowing costs to hover near current levels and to stay above its June projections for longer before eventually easing. It also cautioned that it is ready to change course if price risks emerge.
"It will likely be necessary to keep the policy rate elevated for a time, and the Committee is prepared to raise the policy rate further if needed to bring inflation down to the 2% target within a reasonable time horizon," Governor Ida Wolden Bache said. She added that "underlying inflation moderated and was lower than expected," yet "the inflation outlook somewhat further ahead does not appear to have changed materially."
The bank boosted its CPI outlook through 2028 and now sees the 2% target being reached in 2029. Wolden Bache said wage growth projections are similar to June's, while "somewhat stronger international price impulses" and higher energy costs facing Norwegian firms are pushing prices up, with the exchange rate working the other way.
In Sweden, policymakers said that if the outlook remains unchanged, rate hikes will start this year. Back in August, they had put the probability of a 25 basis point increase in 2026 at 50%. Governor Erik Thedéen told reporters, "We are now signaling an interest-rate increase. But in a sense, this is an increase that comes for positive reasons - namely that growth is performing very well in Sweden," and he said he anticipates the labor market will improve over time. "So this is an interest-rate increase occurring in an environment that is actually positive for Sweden."
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"Riksbank wasn't remotely expected to be this hawkish all of a sudden, while Norges Bank's willingness to tighten further took the markets off-guard. All told, this boosts the outlook for the Nordic currencies," said Bloomberg's Ven Ram. The Norwegian krone traded around 1.0450 per Swedish krona at 12:44 p.m. local time, after touching 1.0524 last week, the strongest since January 2023. Both currencies gained against the euro.
Kjetil Olsen, Nordea Bank Abp's chief economist in Oslo, said higher global rate expectations are feeding into Norway's path, adding, "If Norges Bank had come out soft they could risk a weaker krone." He sees rates staying around present levels for an extended period, with only a slight decline once easing begins.
Traders now put the probability of a Riksbank hike in about two months at 91%, up from roughly 65% at the week's start, with 35 basis points of tightening priced by year end, according to overnight swaps. In Norway, pricing implies just 14 basis points more this year. SEB and Svenska Handelsbanken moved their projected timing for the next Riksbank move up to November. Handelsbanken's chief strategist Claes Måhlén called the path "much more hawkish than expected" and said it signals "a November rate hike is now the Riksbank's base case."
Nordea's chief analyst Torbjörn Isaksson wrote, "We maintain our forecast of a policy rate of 2.00% in November and 2.25% in February next year, which we expect to be the peak. Risks are tilted to earlier and more rate hikes." Bloomberg Economics' Selva Bahar Baziki said the September guidance turned sharply hawkish, pointing to a hike this year as inflation pressures build and domestic demand accelerates markedly. Her team now expects a November increase followed by another in March, taking the rate to 2.25%.
Officials in Oslo moved to cool Norway's economy - the region's biggest energy exporter - as business activity looks set to firm and underlying inflation has stayed above the 2% goal since 2022. Their stance aligns with a broader pattern: the Fed, the ECB and the Bank of Japan have all delivered hikes in recent weeks, suggesting policy rates could stay restrictive longer than many hoped.
In Sweden, momentum has returned. The economy grew again in the second quarter after the government cut taxes on food and fuel before a general election, supporting household spending alongside low credit costs. With energy supplies to Europe still constrained, there are lingering worries that the Iran war could further stoke inflation.
Bottom line, the Nordics just nudged borrowing‑cost expectations higher. Sweden is leaning toward liftoff this year, and Norway is signaling it will keep policy tight and can tighten further. That is already showing up in currencies and swaps. If you are weighing a mortgage reset, a car loan, or a business line of credit, the takeaway is simple: expecting meaningfully cheaper money in the near term looks like a stretch.
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