OSLO (Reuters) – Norway’s central bank left its policy interest rate unchanged at a 16-year high of 4.50% on Thursday, as expected, and said it now plans to cut rates three times in 2025. , which is less than the four cuts previously seen.
“The committee judges that a restrictive monetary policy is still needed to stabilize inflation around the target, but that the time to ease monetary policy is fast approaching,” Norges Bank Governor Ida Woldenbach said. said in a statement.
“Based on the committee’s current assessment of the outlook, the policy rate is likely to be reduced in March 2025,” Norges Bank said.
The policy rate is now expected to decline to 3.75% by the end of 2025, Bache said. Norges Bank, and analysts in a Reuters poll, had previously forecast a decline of 3.50% next year.
The Norwegian crown weakened to 11.79 against the euro at 0958 GMT, from 11.76 just before the announcement.
The Norwegian monetary policy stance contrasts with other western central banks, most of which have already started cutting rates this year as growth has slowed and inflation has eased from high levels in recent years.
Norway’s economy has weathered relatively high interest rates, economists said, helped by rising business investment and wages, increased government spending and currency depreciation.
Norges Bank said the economy was holding up better than previously estimated, while inflationary pressures were much lower. Still, the outlook was unclear, it added.
“There is considerable uncertainty about the outlook for both the global and Norwegian economy,” it said.
Twenty-eight participants in a Dec. 11-16 Reuters poll unanimously predicted the central bank would keep rates on hold this week and nearly all said it would begin cutting in the first quarter of 2025.
Brokers Nordea said the central bank appeared concerned that by keeping rates on hold for too long, it could contract the economy.
“The committee still fears that unemployment could rise significantly if they don’t cut rates soon,” Nordea said.
Norges Bank discussed this as an issue highlighting the risk of a trade war between the United States and China, saying it was “concerned with the risk of an escalation in international trade barriers”.
“Higher tariffs will likely dampen global growth, but the implications for price prospects in Norway are uncertain,” the bank said.
The US Federal Reserve cut rates by a quarter of a percentage point on Wednesday, as expected, but said further cuts depended on continued progress in reducing inflation.
The Nordic country’s core inflation rose to 3% year-on-year in November from 2.7% in October, above the central bank’s 2% target.
The Swedish central bank earlier on Thursday cut rates by 25 basis points, in line with expectations, and said it may ease policy again in the first half of 2025.
In Britain, with the Bank of England due to report the outcome of its latest rate meeting later on Thursday, economists expect no rate change.
