Unlike its counterparts for Sweden, Switzerland and the euro zone, Norges Bank is holding back on interest rate cuts.
Norway’s central bank has held its base rate at 4.5%, keeping borrowing costs at their highest level since 2008.
The committee cited concerns about robust wage growth, which could continue to put upward pressure on inflation.
“Since the last report, price inflation has been slightly lower than forecast, while unemployment has increased as expected,” said the bank in a statement.
“On the other hand, the companies in our regional network are reporting better prospects, and wage growth looks set to be higher than we previously envisioned. This may indicate that price growth will be higher in the future than estimated in the previous report.”
The current rate of 4.5%, introduced last December, was high enough to bring down inflation within a “reasonable time”, the bank added.
Even so, current estimates mean that borrowing costs will not be lowered until next year. When the moment does arrive, cuts would be gradual, said Central Bank Governor Ida Wolden Bache.
After a rise in October and November last year, Norway’s annual inflation rate (CPI) has been falling since January 2024. It is now sitting at 3%.
Officials expect it will not reach its 2% target until the end of 2027.
Compared with many of its counterparts, Norges Bank is taking a more hawkish stance.
Last month, Sweden’s Riksbank cut rates for the first time since 2016, pencilling in two more cuts before the end of the year.
Just a few weeks ago, the ECB followed suit in lowering borrowing costs, while the Swiss National Bank today announced its second cut of the year.
Following Norway’s Thursday announcement, the krone rose to a four-month high against the euro.
The currency has been rallying in recent weeks as Norges Bank appeared hesitant to cut rates.
