OSLO, Sept 19 (Askume) – Norway’s central bank kept its policy rate unchanged at a 16-year high of 4.50% on Thursday, as widely expected, and said any rate cut would have to wait until next year.
“The committee believes that restrictive monetary policy is necessary to reduce inflation to the target level within a reasonable period of time,” the central bank said in a statement.
Economists are divided on when Norges Bank will start easing policy , with a majority of economists polled by Askume predicting a rate cut in December this year, while a minority said March 2025 is the most likely time.
The bank said, “The policy rate forecast in this report implies that the policy rate will remain at 4.5% until the end of 2024, and then gradually decrease from the first quarter of 2025.”
The Norwegian currency strengthened to 11.67 against the euro at 0855 GMT, up from 11.78 before the news.
Norges Bank’s decision differs from recent decisions by other central banks. The Federal Reserve on Wednesday cut interest rates for the first time in an expected series of cuts, by half a percentage point more than usual, following recent policy easing by the European Central Bank and other central banks.
Economists say Norges Bank must balance above-target inflation triggered by currency devaluation with a cooling economy that is now slowing overall growth.
Oystein Dørum, an economist at the Federation of Norwegian Enterprises, said the new interest rate policy is clearly more aggressive than expected.
“Most scenarios now point to an earlier rate cut,” he said.
But SpareBank 1 economist Elisabeth Holvik said the tighter stance on interest rates was aimed at supporting the weakening economy.
“This is a signal to currency markets that Norges Bank understands they have to stabilise the currency first,” he said.
In June, Norges Bank postponed its expected easing policy in September until early 2025 and said last month that interest rates would remain at current levels “for some time,” without specifying how long that would last.
“The forecast is little changed from the June report, but still implies a modest reduction in policy rates until 2025,” the central bank said on Thursday.
Norges Bank has lowered its economic growth forecast for 2025, estimating that the non-oil economy’s gross domestic product will grow 1.1% next year, down from 1.3% in June.
Meanwhile, core inflation is expected to be 3.0% next year, down from 3.4% in June but still above Norges Bank’s 2.0% target.
