Norway’s central bank held its key interest rate at a 16-year high on Thursday and said it would hold it there “for some time” as inflation remains too high.
In December, the central bank surprised the market when it hiked its key rate for the 14th time since September 2021 — taking it to 4.5 percent — with most economists believing the rate level had peaked.
While inflation has cooled, it remains well above the bank’s two-percent target.
Norge Bank’s monetary policymakers concluded Thursday that the interest rate was “now sufficiently high to return inflation to target within a reasonable time horizon,” said governor Ida Wolden Bache said.
In 2023, Norway’s consumer prices rose by 5.5 percent.
But underlying inflation, the central bank’s preferred indicator as it excludes volatile energy prices and tax fluctuations, remains at 6.2 percent.
The Norwegian currency, the krone, has strengthened somewhat since December, but remains weak against other currencies, making imports more expensive.
While financial markets are eager to see interest rates start coming down, Norges Bank said they would have to wait a bit longer.
“There will likely be a need to maintain a tight monetary policy stance for some time ahead,” it said.
A new rate hike could even be in the offing if the krone were to depreciate further or if inflation were to remain high longer than previously projected, it warned.
Most economists expect Norwegian rates to be cut by year-end, with some predicting a first cut in September and others saying it could come in December.
The European Central Bank and the US Federal Reserve have also kept their rates steady after a series of hikes. Investors are now looking for clues as to when the banks will start to cut rates.
