Norway: Norges Bank holds fire again in September
At its meeting on 18 September, Norges Bank decided to keep the policy rate unchanged at 4.50%. The decision to hold was unanimous and priced in by markets.
The decision to keep interest rates unchanged was primarily driven by still-high underlying inflation. Norges Bank noted that, while headline inflation has cooled markedly from its peak and has been lower than expected since the Bank’s June meeting, core inflation has not waned as much. Moreover, upside risks to the inflationary outlook remain, namely a weak krone and recently strong wage growth, both of which could slow disinflation. As such, the Bank deemed elevated interest rates still necessary to guide inflation back to its 2.0% target “within a reasonable time horizon”.
Norges Bank’s forward guidance indicated that the policy rate will end 2024 at its current level and that the easing cycle will start in Q1 2025. The Bank’s forecast for the policy rate at end-2025 was also slightly more dovish than that given in June. Still, the Bank noted that it stands ready to either hike the rate further or lower it sooner than expected depending on the evolution of inflation. Over half of our panelists see Norges Bank cutting rates this year, by between 25 and 50 basis points; the rest expect the policy rate to end 2024 at its current level. The next meeting is set for 6 November, with the decision to be announced the following day.