FX.co ★ Norges Bank Keeps Policy Rate Steady At 4.50%

The Norwegian Central Bank decided to maintain its primary interest rate for the third consecutive decision on Friday. This decision reflects the belief that the current position should be upheld for the foreseeable future in order to achieve targeted inflation levels within a reasonable timeframe.

The Monetary Policy and Financial Stability Committee, led by Governor Ida Bache, has decided to maintain the policy rate at 4.50 percent, as stated by Norges Bank. The last adjustment to the interest rate was an increase of 0.25 percent in December.

Governor Ida Wolden Bache indicated that based on the committee's recent evaluation of economic prospects, it is likely that the policy rate would remain unchanged for an extended period. She noted that the monetary policy currently exerts a restrictive effect, as economic growth is relatively slow.

Moreover, inflation remains higher than the bank's target of 2.0 percent, despite recent slowing down. In fact, data showed that Norway's inflation rate dipped to 3.9 percent in March from 4.5 percent in February. Norges Bank stressed that if it's necessary to further increase the policy rate to achieve the inflation target within a reasonable timeline, the committee is ready to raise it once more.

Jack Allen-Reynolds, an economist with Capital Economics, suggested that even though Norway's inflation rate has been decreasing more rapidly than Norges Bank anticipated for quite some time, monetary policy makers are not being complacent, as core rates still significantly overshoot targets. While the bank currently plans to hold interest rates steady until 2025, Allen-Reynolds anticipates more inflation decreases might pave the way for monetary policy loosening within the year.

The next policy decision announcement is scheduled for June 20.