Norges Bank Holds Firm on Interest Rates Amid Inflation Concerns

In a decisive move to tackle the challenge of persistently high inflation, Norges Bank announced on Thursday its decision to keep the key policy rate steady at 4.5%. The Monetary Policy and Financial Stability Committee hinted at potential rate reductions towards the end of 2025, signaling a cautious but optimistic outlook for the economy.

Governor's Warning Against Premature Rate Cuts

Governor Ida Wolden Bache emphasized the risks of premature rate adjustments, stating, "Inflation has picked up and been markedly higher than expected." She warned that early cuts could fuel further price increases, undermining the bank's efforts to stabilize the economy.

Looking Ahead: Rate Forecasts and Economic Indicators

Despite the current restrictive stance, Norges Bank projects a gradual easing of the policy rate to 4% by the end of the year, with continued reductions in the following years. The bank acknowledged the high level of uncertainty in these forecasts, noting that shifts in inflation or unemployment trends could adjust the timeline for rate changes.