FX.co ★ Norges Bank Keeps Interest Rate at 4.25%

In August, Norges Bank left its policy rate unchanged at 4.25%, matching market expectations, after inflation slowed more than anticipated over the summer. Headline CPI inflation eased to 3% in July, while underlying inflation dropped to 2.7%. Both remain above the central bank’s 2% target, however, and policymakers judged it is still too soon to conclude that inflation is on a sustainably lower path. As a result, the Bank maintained a restrictive monetary policy stance and cautioned that an additional rate increase may still be required. Economic activity and labour-market conditions have evolved largely in line with forecasts, though house prices fell sharply in July and construction activity remains weak. The krone has regained some ground after depreciating earlier in the summer. The next key signal will come in September, when updated economic projections are released and policymakers reassess the future trajectory of interest rates.