Norway: Central Bank stays put again in August
At its meeting on 14 August, Norges Bank decided to leave the policy rate unchanged at a 16-year high of 4.50%. The decision was unanimous and had been priced in by markets.
Norges Bank said it decided to hold as it expects that disinflation will slow down ahead due to a brisk increase in business costs; the Bank fears that “if the policy rate is lowered prematurely, inflation could remain above target for too long”. Adding to this, the krone has been weaker than projected in Norges Bank’s June policy report, pushing up the cost of imports.
Norges Bank’s forward guidance indicated that the policy rate “will likely be kept at the current level for some time ahead”. Still, the Bank noted that it stands ready to both hike the rate further or lower it sooner than expected depending on the evolution of inflation. The majority of our panelists expect Norges Bank to kick off its loosening cycle in Q4 with around 25 basis points worth of cuts. The next policy meeting is set for 18 September, with the decision to be announced the following day.