On Thursday, Norway's central bank announced that it would maintain its key interest rate, indicating that it is expected to remain at this level for the foreseeable future. The Monetary Policy and Financial Stability Committee of the Norges Bank unanimously agreed to keep the policy rate at 4.50 percent.
According to the bank, this decision was based on the Committee's current assessment of the outlook and balance of risks. Governor Ida Wolden Bache stated that the current policy rate is sufficiently high to bring inflation back to target within a reasonable timeframe. She added that the policy is helping to slow the economy.
The bank also noted specific factors that may suppress disinflation, including rising business costs, high wage growth, and the depreciation of the krone through 2023. As such, a tight policy will be necessary for some time. However, the bank did note that once inflation decreases and economic conditions warrant it, they may begin to lower the policy rate.
Jack Allen-Reynolds, an economist at Capital Economics, believes the bank will hold steady for the next few meetings, as policymakers wait for a consistent decrease in core inflation. He anticipates the first cut may occur in May, but he also warned that it could be postponed.
