The interest rate is now sufficiently high, the central bank believes.
Published:
Yesterday 10:00
Updated yesterday 10:52
The short version
- Norges Bank has decided to keep the policy rate at 4.5 per cent, and suggests that it will probably remain at this level for some time to come.
- Central Bank Governor Ida Wolden Bache believes that the interest rate is sufficiently high to bring price growth back to the target within a reasonable time.
- The increases in mortgage interest rates following the interest rate hike in December have not yet come into force, as they must be notified eight weeks before they take effect.
- Norges Bank points out that the Norwegian krone is stronger than expected. The central bank has previously stated that the weak krone exchange rate helps to keep price inflation up.
- At the same time, Norges Bank emphasizes that a new interest rate jump and an earlier interest rate cut than they have assumed could be relevant, depending on the development in price inflation and the economy.
The summary is made by the AI tool ChatGPT and quality assured by E24’s journalists
Sea view
Norges Bank leaves the key interest rate unchanged at 4.5 per cent.
It was widely expected in advance. Therefore, the tension has primarily been about whether Central Bank Governor Ida Wolden Bache would come up with some new signals, or whether she would stick to the line from the last time.
– Our assessment is that the interest rate is now sufficiently high to bring price growth back to the target within a reasonable time, says Central Bank Governor Ida Wolden Bache in today’s decision.
The central bank writes that “the key interest rate will probably be kept at this level for quite some time to come”. That was also the signal at the previous meeting.
Read on E24+
20 economists: This is how many interest rate cuts you can get this year
The central bank raised interest rates in December, which surprised many Norwegian economists. Norges Bank then signaled that there will only be one interest rate cut in 2024, and that it will not come until the autumn.
The banks’ increases in mortgage interest rates after the December increase have still not taken effect, as notice must be given in eight weeks before the changes come into force.
Central bank governor Ida Wolden Bache has signaled that there will only be one interest rate cut in 2024, and that only in the autumn. Photo: Ole Berg-Rusten / NTB
Today’s interest rate meeting is a so-called interim meeting. This means that the central bank will not come up with new economic forecasts, or any updated interest rate path about where they think the interest rate will be in the coming years. Normally, Norges Bank rarely changes the interest rate at interim meetings.
Time for a chat? Help us make E24 even better.
Price growth still above target
Norges Bank writes that the outlook for the Norwegian economy overall does not appear to have changed significantly since they came up with forecasts in December.
The Central Bank points out that the underlying price increase has slowed further, but is still high, that unemployment is low and that growth in the Norwegian economy is weak.
also read
Chief economist on the interest rate: – Disappointing that they are prepared to raise it again
Price growth came in at 4.8 per cent in December, the same as in November. Core inflation Core inflation Price growth excluding energy prices and tax changes, which Norges Bank looks at the most, fell at the same time to 5.5 per cent. Norges Bank manages according to a target of stable price growth of around two per cent.
Unemployment increased slightly to 1.9 percent last month, but is still low. GDP figures showed a decline for the Norwegian economy in November, after two months of some growth.
Stronger crown
Norges Bank also points out that the krone exchange rate is stronger than they had assumed.
– Since our interest rate meeting in December, the krone has strengthened again, and more than we expected, says Wolden Bache at the press conference.
The krone exchange rate is an important element when the interest rate is set. Exchange rates are influenced, among other things, by the level of interest rates, and expectations of the level of interest rates, in various economies. Norges Bank has pointed out several times that the weak krone exchange rate is helping to keep price growth up.
The krone has strengthened slightly after the day of the interest rate decision, but there have been relatively small krone movements.
Norges Bank further writes that “as price inflation comes down and conditions in the economy indicate it, we can start to lower the interest rate again”.
At the same time, it is emphasized that a new interest rate jump and an earlier interest rate cut than they have envisaged may both be relevant, if the development of price inflation, the krone or the economy in general changes from what the central bank has assumed.
Now you get the most important news from E24 on Whatsapp. Follow us here
Interest rate break in other countries
Abroad, the US central bank (Fed) has kept the interest rate unchanged at the range of 5.25-5.50 per cent since July last year. The European Central Bank (ESB) has left the interest rate at 4 percent since September.
Recently, the discussion has revolved around when and how quickly the interest rate will be cut. The Fed has signaled that it envisages three interest rate cuts in 2024, while the ECB has so far been reticent to talk about future interest rate cuts.
The market, for its part, is pricing in at least five interest rate cuts this year from both central banks.
The ECB has an interest rate meeting later on Thursday.
Get today’s most important economic news here!