Norway's Central Bank Holds Rates Amid Inflation Concerns

Norway's central bank, Norges Bank, decided to keep interest rates steady at a 17-year high of 4.50%, defying expectations of a rate cut due to unexpected inflation growth. Key factors include a rise in core inflation and stronger-than-expected economic indicators leading to rate stability plans extended towards 2025.

Norway's central bank left interest rates unchanged at a notable 4.50%, marking a 17-year high. This decision aligns with most forecasts, driven by an unexpected increase in inflation, postponing any immediate reductions in the policy rate.

In January, Norges Bank suggested a 25 basis point rate cut could occur in March, with the governor hinting at an upcoming initial reduction. However, February's core inflation rose to 3.4% from 2.8% in January, surpassing the 2% target and prompting analysts to correctly forecast the decision to maintain the current rate.

Despite the inflation surge, Treasury officials project rate decreases could commence in 2025, aiming for a target of 3.75%. This plan is rooted in ensuring price stability, as outlined by Governor Ida Wolden Bache, stating that lowering the rate prematurely could trigger rapid price increases.

(With inputs from agencies.)