Norway keeps interest rate on hold, eyes September cut

investing.com:

By Terje Solsvik

OSLO (Reuters) -Norway's central bank kept its benchmark interest rate unchanged at a 16-year high of 4.50% on Thursday, as unanimously expected by analysts, and signalled it plans a single cut to the cost of borrowing this year, fewer than anticipated by most economists.

«The rate path we're presenting today indicates… an autumn rate cut, most likely in September,» Governor Ida Wolden Bache told a press conference.

A second rate reduction could follow by the end of March 2025, she later said.

The Norwegian crown strengthened to 11.51 against the euro by 1050 GMT, from 11.53 just before the announcement.

The forward rate curve for the years 2024 to 2026 was largely unchanged from levels seen in December, Norges Bank's monetary policy report showed, with a rate of 4.25% at the end of the current year.

Analysts in the Reuters poll on average have forecast that Norges Bank will cut the cost of borrowing twice in the second half of 2024, to 4.0% by year-end.

«In its assessment of the interest rate outlook, the committee was concerned with the possibility that if the policy rate is lowered prematurely, inflation could remain high, among other things, because the crown might then weaken,» Norges Bank said.

«On the other hand, an overly tight monetary policy could restrain the economy more than needed.»

STRONGER GROWTH

Economic developments may still delay the first rate cut to December this year, brokers Nordea Markets said.

«We still hold our view for a first rate cut in December as we believe that the (currency) will remain under pressure, in part due to later rate cuts abroad than markets currently anticipate,» Nordea wrote in a note to clients.

The central bank raised its forecast for economic growth,