Norges Bank Holds Steady, But First Rate Cut Nears

Norway's central bank, Norges Bank, has held its key policy rate at 4.5%, signaling its commitment to cooling inflation, but also hinting at an impending shift towards monetary policy easing, reports the Wall Street Journal. The decision aligns with a recent Wall Street Journal poll.

The 4.5% policy rate, in place since December 2023, has played a significant role in curbing inflation from its peak. However, Norges Bank acknowledges that rising business costs will likely impede further disinflation.

While the central bank had previously indicated that the policy rate would likely remain at 4.5% throughout 2024, with gradual reductions anticipated from the first quarter of 2025, its stance has shifted. Norges Bank now expects to initiate its first rate cut of the easing cycle in March, although it anticipates somewhat smaller reductions in the coming years.

"The committee judges that a restrictive monetary policy is still needed to stabilize inflation around target, but that the time to begin easing monetary policy is soon approaching," said Governor Ida Wolden Bache, as quoted by the WSJ.

The central bank emphasized its desire to avoid overly restrictive economic measures, aiming to bring inflation down within a reasonable timeframe.