Home Economy News Norway keeps interest rate on hold, eyes autumn cut

Norway keeps interest rate on hold, eyes autumn cut


Norway keeps interest rate on hold, eyes autumn cut By Reuters

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Published Mar 21, 2024 05:25AM ET
Updated Mar 21, 2024 05:41AM ET

© Reuters. View of entrance to Norway’s central bank in Oslo, April 20, 2023. REUTERS/Victoria Klesty/File Photo

By Terje Solsvik

OSLO (Reuters) – Norway’s central bank kept its benchmark interest rate unchanged at 4.50% on Thursday, as unanimously expected by analysts, and signalled it plans a single cut to the cost of borrowing this year, less than anticipated by most economists.

“The current forecast indicates that the policy rate will continue to lie at 4.5% in the period to autumn before gradually moving down,” the central bank said in a statement.

The Norwegian crown strengthened to 11.50 against the euro by 0926 GMT, from 11.53 just before the announcement.

The forward rate curve for the years 2024 to 2026 was largely unchanged from levels seen in December, Norges Bank’s monetary policy report showed.

The central bank’s forecast pointed to a first rate cut of 25 basis points in December this year, brokers Nordea Markets said in a note to clients.

Analysts in the Reuters poll on average have forecast that Norges Bank will cut the cost of borrowing twice in the second half of 2024, to 4.0% by year-end.

“In its assessment of the interest rate outlook, the committee was concerned with the possibility that if the policy rate is lowered prematurely, inflation could remain high, among other things, because the crown might then weaken,” Norges Bank said.

“On the other hand, an overly tight monetary policy could restrain the economy more than needed.”

The central bank raised its forecast for economic growth, predicting mainland GDP growth in 2024 of 0.5%, up from a 0.1% expansion seen in December. The 2025 estimate was maintained at 1.2%.

Norges Bank expects core consumer prices to rise by 4.1% this year, less than the 4.8% seen in December. Core inflation stood at 4.9% year-on-year in February, an 18-month low, but still exceeding the central bank’s goal of 2.0%.

The Swiss National Bank cut its main interest rate by 25 basis points to 1.50% on Thursday, a surprise move which made it the first major central bank to dial back tighter monetary policy aimed at tackling inflation.

The U.S. Federal Reserve on Wednesday said it remained on track for three rate cuts later this year, but trimmed the number of cuts expected in 2025 from four to three for a slightly shallower pace of easing.

Norway keeps interest rate on hold, eyes autumn cut

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