OSLO (Reuters) – Norway’s central bank will keep its key policy interest rate unchanged this week, according to all 30 economists in a Reuters poll, but it remains on track to cut the cost of borrowing later in the year.
Norges Bank said in March it planned to cut rates this year from a 16-year high of 4.50%, with the reduction in borrowing costs most likely to begin in September.
The Norwegian currency has since depreciated to trade at a weaker level than expected by the central bank, which could stoke inflation and affect the timing of rate policy changes.
On an import-weighted index basis, the crown (NOK) on Tuesday traded at its weakest level since mid-December, some 3% below Norges Bank’s full-year projection.
Norway’s core inflation rate stood at 4.5% year-on-year in March, a 20-month low, down from a record 7.0% last June but still exceeding the central bank’s goal of 2.0%.
“Since the March meeting a weak NOK, higher rates abroad, and slightly higher domestic capacity utilisation more than offset the lower inflation figures,” DNB Markets said in a note to clients.
“We expect Norges Bank to reiterate the guidance from March but possible downplay the guiding for a September cut,” it added.
The ECB and the U.S. Federal Reserve are both expected to cut rates in coming months.
A majority of economists in the April 25-30 Reuters poll predicted there would be one rate cut in the July to September quarter of 2024 and another in the final three months, each of 25 basis points, to end the year at 4.00%.
The poll showed a median prediction for 2025 of three cuts, bringing the policy rate down to 3.25%. The end-2025 forecasts varied from a low of 3.00% to a high of 4.00%.
