The Norwegian central bank remains on hold as scheduled, reiterating that it is not in a hurry to cut interest rates
The Norwegian central bank kept the key deposit rate unchanged at 4.5% on Thursday, reiterating that it is not in a hurry to cut rates, in line with market expectations. The central bank's governor stated that rates may remain unchanged until the end of 2024, as the weak krone and rising corporate costs pose risks. Despite a decline in inflation, the Norwegian central bank still needs to adopt a restrictive monetary policy. In contrast to the Swedish central bank's rate cuts, the Norwegian krone rose by 0.7%, as the market expects rates to remain unchanged. Analysts believe that Trump's victory in the U.S. election could exacerbate the krone's predicament
According to the Zhitong Finance APP, the Norwegian central bank maintained its key deposit rate at 4.5% on Thursday, the highest level since December 2008, in line with market expectations. The Norwegian central bank reiterated that there are no plans to ease policy in the near term, as the weak Norwegian krone and rising corporate costs pose risks.
Norwegian central bank Governor Ida Wolden Bache stated in a Thursday announcement that rates may remain unchanged "until the end of 2024."
Norwegian policymakers noted, "Inflation has clearly declined, but the depreciation of the Norwegian krone in recent years and the rapid rise in corporate costs may suppress further anti-inflation efforts. The committee believes that a restrictive monetary policy is still needed to bring inflation down to target levels within a reasonable timeframe."
Norwegian policymakers are among the most aggressive hawks in developed countries, repeatedly delaying a shift to easing policy due to currency depreciation and strong wage growth keeping inflation expectations high.
The decision by the Norwegian central bank stands in stark contrast to that of the Swedish central bank, which announced a 50 basis point rate cut earlier on Thursday to boost its faltering economy.
Following the interest rate decision, the Norwegian krone strengthened further, as the market believes Norwegian policymakers will maintain rates despite most G10 countries easing their policies. The Norwegian krone rose 0.7% on Thursday to 11.8005 kroner per euro, close to its highest level in over a week.
Valentin Marinov, head of G10 foreign exchange research at Crédit Agricole, stated, "The Norwegian krone remains one of the higher-yielding currencies among G10 currencies, which may provide some support amid the ongoing global easing cycle."
Despite inflation slowing faster than the Norwegian central bank expected, the Norwegian krone has still been one of the worst-performing currencies among G10 currencies this year, exacerbating imported inflation and wage pressures. Some analysts believe that Donald Trump's victory in the U.S. election has intensified the plight of the Norwegian krone, increasing the likelihood that the Norwegian central bank will not ease monetary policy at all.
The Norwegian central bank pointed out that government spending plans imply that public spending in 2025 will be slightly higher than in 2024 and also slightly above the expectations from September