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Norway Norges Bank Interest Rate Decision in line with forecasts (4.5%)
Confirmed
In Short: Governor Ida Wolden Bache told Reuters that the decision was based on the current outlook for the Norwegian economy, which remains broadly in line with previous forecasts.
Norway's central bank, Norges Bank, kept its policy interest rate unchanged at 4.25% on Thursday, in line with market expectations.
Chief economist for the Norwegian Confederation of Enterprises, Oeystein Doerum, echoed this sentiment, predicting that the next rate cut would come as soon as September.
Before the June cut, Norway's policy stance had contrasted with other Western central banks, most of which started cutting rates last year as growth slowed and inflation eased.
While the job of tackling Norwegian inflation has not been fully completed, the central bank does not want to restrict the economy more than needed.
The decision comes as the US Federal Reserve is widely expected to lift its short-term interest rate by Wednesday for the first time in three years to fight stubbornly high inflation.
Traders will closely monitor Fed Chairman Kevin Warsh’s press conference after the rate decision, as it may offer hints about the US interest rate outlook.
On Friday, attention will shift to the Bank of Japan (BoJ) interest rate decision, with the BoJ likely to raise its key policy interest rate by a quarter point to 1.25% from 1.00% at its September meeting.
Traders will keep an eye on BoJ Governor Kazuo Ueda about the pace of future rate hikes and how far the central bank could take rates under the current tightening cycle.
What this adds
The decision by Norges Bank to cut rates in June was a surprise move, marking the first reduction in more than five years.
The BoJ's decision to gradually abandon its ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing the interest rate differential.
Background
Norway, officially the Kingdom of Norway, is a Nordic country comprising the western and northernmost parts of the Scandinavian Peninsula in Northern Europe, the remote Arctic island Jan Mayen and the archipelago Svalbard. Bouvet Island, located in the Subantarctic, is a dependency, and not a part of the Kingdom; Norway also claims the Antarctic territories of Peter I Island and Queen Maud Land.
What's confirmed
- Norway's central bank, Norges Bank, kept its policy interest rate unchanged at 4.25% on Thursday, in line with market expectations.
- Chief economist for the Norwegian Confederation of Enterprises, Oeystein Doerum, echoed this sentiment, predicting that the next rate cut would come as soon as September.
- Before the June cut, Norway's policy stance had contrasted with other Western central banks, most of which started cutting rates last year as growth slowed and inflation eased.
- While the job of tackling Norwegian inflation has not been fully completed, the central bank does not want to restrict the economy more than needed.
- The decision comes as the US Federal Reserve is widely expected to lift its short-term interest rate by Wednesday for the first time in three years to fight stubbornly high inflation.
- Traders will closely monitor Fed Chairman Kevin Warsh’s press conference after the rate decision, as it may offer hints about the US interest rate outlook.
- On Friday, attention will shift to the Bank of Japan (BoJ) interest rate decision, with the BoJ likely to raise its key policy interest rate by a quarter point to 1.25% from 1.00% at its September meeting.
- Traders will keep an eye on BoJ Governor Kazuo Ueda about the pace of future rate hikes and how far the central bank could take rates under the current tightening cycle.
What's still developing
- "If the economy evolves broadly according as envisaged, we will lower the policy rate further in the course of the year," Governor Ida Wolden Bache told Reuters.
- "It will likely be appropriate to continue with a cautious normalisation of the policy rate ahead," Bache said.
- ARENDAL, Norway, Aug 14 - Norway's central bank kept its policy interest rate on hold at 4.25% on Thursday, as unanimously predicted by analysts in a Reuters poll, and reiterated plans to cut borrowing costs later this year.
- All 26 analysts in an August 8-11 poll expected rates to stay on hold this week and were unanimous in predicting a cut in September to 4.00%, and most also anticipated a cut in December to end 2025 on 3.75%.
- LSU head coach Lane Kiffin says the decision to leave former NFL players Dae’Quan Wright and Zxavian Harris off LSU’s roster for tonight’s season opener against Clemson was made in the best interest of the team and the university.
- The Relative Strength Index (RSI) around 40 suggests subdued momentum, hinting that any corrective uptick would likely face selling interest into nearby overhead levels.
- The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
- The 25-basis-point hike to 1.25 percent was expected by markets following the recent tightening by the European Central Bank and the US Federal Reserve, though the decision was not unanimous as it was carried by a 7-2 majority vote.
- "Given that underlying CPI inflation has been approaching two percent and financial conditions have been accommodative, the bank will continue to raise the policy interest rate," the BoJ said on its website.
- Government support for gasoline and electricity fees contributed to the slower pace of inflation, the data showed.
- The unit has been weighed in particular by the wide gap between Japan's still low interest rates and those of the Federal Reserve, which encouraged investors to favour better-yielding dollar-denominated assets.
- The reading from the internal affairs ministry, which excludes volatile fresh food prices, was lower than forecasts for 1.8 percent.