As anticipated, Norway’s central bank kept the country’s policy interest rate at a 16-year high of 4.50 percent on Thursday. It also stated that any rate reductions would have to wait until the first quarter of 2020, which would strengthen the country’s currency. The central bank released a statement saying, “The committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon.”
When Norges Bank may start to loosen policy has divided economists; most surveyed by Reuters anticipated a drop in December of this year, while a smaller group suggested March of 2025 as the most likely date. The bank stated, “This report’s policy rate forecast implies that the policy rate will stay at 4.5 percent through the end of 2024 before being gradually reduced starting in the first quarter of 2025.”
Prior to the announcement, the Norwegian crown was trading at 11.78 against the euro, but at 0805 GMT it had risen to 11.66. The decision made by Norges Bank differs from other central banks’ recent actions. After recent policy easing by the European Central Bank and others, the US Federal Reserve on Wednesday began an anticipated sequence of interest rate decreases with a larger-than-usual half-percentage-point reduction.
The Norwegian central bank, according to economists, needs to balance a cooling economy with low overall growth with above-target inflation that is made worse by a declining currency in its monetary policy.
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