OSLO, Sept 16 (Askume) – All 27 economists in a Askume poll said Norges Bank would keep its key policy rate unchanged at a 16-year high of 4.50% this week, with investors watching to see when Norges Bank might signal action.
The central bank said its monetary policy must balance above-target inflation, exacerbated by currency depreciation, with a cooling economy that is now experiencing lower overall growth.
Last month, Norges Bank said Norway would keep interest rates on hold “for some time” to tackle inflation, and is expected to say on Thursday whether that means a rate cut could happen before the end of the year or wait until next year.
The latest forecast released by Norges Bank in June said that there will be three interest rate cuts in 2025, each by 25 percentage points, and the interest rate will reach 3.75% by the end of the year, which will be implemented in early March.
Forecasts will be updated on Thursday, with most analysts in the Sept. 12-16 survey currently expecting a rate cut this December, followed by four more cuts by the end of 2025, leaving the policy rate at 3.25%.
Brokers said markets are also anticipating seven rate cuts by the end of 2025, reflecting expectations for steady rate cuts abroad, including in the Federal Reserve’s policy update on Wednesday .
Surprise for the Eagles?
But some analysts have warned that the weaker currency could force the Norges Bank to pause measures to avoid a further depreciation against the euro and dollar, which could fuel inflation.
“We believe the market will be in for a strong surprise,” Commerzbank said in a note to clients on Sept. 12, adding that the most likely time for a rate cut would be March next year.
“The interest rate path will be lower, but not to the extent the market expects,” it said.
After taking out changing energy prices and taxes, Norway’s core inflation rate fell to 3.2% in August from 3.3% in July, in line with analysts’ expectations but still well above the central bank’s 2.0% target.
