Norway Central Bank Holds Steady Amid High Inflation: Forecasts Rate Cuts in 2025

Norway's central bank maintained its policy interest rate at 4.50%, a 16-year high, signaling future rate cuts in early 2025. The decision aims to balance high inflation, driven by a weak currency, against a slowing economy. The Norwegian crown strengthened following the announcement.

Norway's central bank has decided to keep its policy interest rate at 4.50%, a 16-year high, as expected. The bank plans to start cutting borrowing costs in the first quarter of next year, which has bolstered the Norwegian crown currency.

"The committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon," stated the central bank. While economists are divided on the timing, most predict a rate cut by December this year, with some expecting it in March 2025.

"The policy rate forecast in this report implies that the policy rate will remain at 4.5% to the end of 2024 before being gradually reduced from the first quarter of 2025," the bank reported. The crown strengthened to 11.66 against the euro from 11.78 just before the announcement. Economists emphasize that the central bank needs to balance above-target inflation, worsened by a weakening currency, with a cooling economy experiencing low growth.

(With inputs from agencies.)