Norway holds interest rate steady at 4.5%, eyes cut by year-end
Norway's central bank kept interest rates on hold at a 17-year high of 4.5% today, as unanimously predicted by analysts, reflecting a resurgence of inflation that has prevented policy-makers from cutting borrowing costs.
"If the policy rate is lowered prematurely, prices may continue to rise rapidly," Norges Bank Deputy Governor Paal Longva said in a statement.
"The committee's current assessment of the outlook implies that the policy rate will most likely be reduced in the course of 2025," he added.
Norges Bank in a March policy reversal maintained its interest rate at 4.5%, the highest level since 2008, as an unexpected rise in consumer prices led the central bank to postpone long-planned monetary easing.
Meanwhile, a restrictive monetary policy is needed to bring inflation down to target within a reasonable time horizon, the central bank said today.
Norway's annual core inflation rate stood at 3.4% year-on-year in March, the latest available data showed, in line with expectations in a Reuters poll but well above the central bank's 2% target.
All 24 analysts in a Reuters poll had predicted that rates would stay unchanged today.
Norway's policy contrasts with steps taken by other Western central banks, most of which started cutting rates last year as growth slowed and inflation waned.
"We continue to believe that the first rate cut will be delayed until September," Handelsbanken wrote in a note to clients.
A majority of the analysts polled between April 30 and May 5 predicted a rate cut in the third quarter, followed by a second one in the final three months of the year to end 2025 at 4%.
"Trade barriers have become more extensive, and there is uncertainty about future trade policies. This may pull the interest rate outlook in different directions," Longva said.
The US Federal Reserve last night kept its policy rate on hold, as did Sweden's Riksbank today, while analysts expect the Bank of England to cut borrowing costs later today.
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