Norway's Central Bank Holds Rates Steady Amid Inflation Concerns

Norway's central bank has decided to keep interest rates at a 16-year high of 4.50%, amid concerns about inflation and a falling currency. Economists are divided over when the bank might begin to cut rates, with predictions ranging from December 2023 to 2025. The bank plans to update its forecast in September.

Norway's central bank has announced that it will maintain its interest rates at a 16-year high of 4.50% to combat inflation, as reported on Thursday after its recent monetary policy meeting. This decision, in line with analyst expectations, reflects the bank's need to balance inflation pressures exacerbated by a depreciating currency with a sluggish economy showing low growth.

Governor Ida Wolden Bache emphasized that the policy rate is likely to stay the same for the foreseeable future, with a new interest rate forecast expected in September. This stance contrasts with the June statement, where rates were expected to remain unchanged until the end of 2024. The latest announcement did not specify when rate cuts might occur, highlighting uncertainties in future economic developments and the impact of currency fluctuations on inflation.

Although Norway's core inflation dropped to 3.3% in July, it remains above the 2.0% target. Mixed economic signals, including a weakened currency and higher-than-expected unemployment, are contributing to the central bank's cautious approach. Nonetheless, a majority of economists anticipate an interest rate cut by year-end, with further reductions expected through 2025.

(With inputs from agencies.)