Norway: Central Bank holds rates at over 15-year high in December
Norges Bank does not deviate from announced path: At its meeting on 18 December, Norges Bank held fire, keeping the policy rate at 4.50%. The decision was unanimous, and had been priced in by markets as the Bank stuck to its forward guidance.
The krone remains a headache: Norges Bank deemed that restrictive monetary policy was still necessary to anchor inflation around its 2.0% target. The Bank is concerned about rapidly rising business costs that could stall the slowdown in inflation. Another source of worries stems from a weak krone and its impact on imported inflation. Lastly, regarding activity, the Bank noted that the economy seemed to be outperforming its expectations, adding demand-side inflationary pressures.
Policy easing to begin in Q1 2025: The Central Bank said that, based on its current assessment, it will most likely reduce the policy rate in March 2025. The Bank’s monetary policy assessment sees three 25 basis point reductions in 2025. Our Consensus is for 100 basis points worth of reductions in 2025. The next meeting is scheduled for 22 January, with the decision to be announced the next day.