Norway's Central Bank Holds Interest Rate

By Terje Solsvik and Gwladys Fouche

OSLO (Reuters) – Norway's central bank maintained its policy interest rate at a 16-year high of 4.50% on Thursday, as anticipated by analysts in a Reuters poll. The bank confirmed it will keep the rate steady until the end of the year.

"The committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon," the central bank stated.

Norwegian monetary policy differs from other Western central banks, many of which have started cutting rates this year. Earlier on Thursday, the Swedish central bank reduced rates by 50 basis points and hinted at future cuts if economic conditions remain unchanged.

The Federal Reserve, Bank of England, and Czech National Bank are also expected to announce rate cuts later today.

Norges Bank noted that the outlook for the Norwegian economy has not changed significantly since September, when it projected rates would begin to decline in the first quarter of 2025.

"If the economy evolves as currently envisaged, the policy rate will be held at today's level until the end of the year," said Norges Bank Governor Ida Wolden Bache at a press conference.

The central bank stated that new information regarding developments will be available before the next monetary policy meeting in December.

Following the announcement, the Norwegian crown appreciated to 11.79 against the euro from 11.81.

Although Norges Bank is likely to reduce rates in March 2025, there is uncertainty according to Handelsbanken Markets. Recent market trends indicate that March could potentially be too early for a cut.

Inflation has been slightly lower than expected since September, yet a weakening Norwegian currency has led to upward pressure on consumer prices, as higher market interest rates prevail.

A weaker crown makes imports more expensive while a stronger currency can help reduce inflation. The core inflation in Norway eased to 3.1% year-on-year in September, down from a peak of 7.0% in June 2023, but still above the central bank's 2.0% target.