Norway keeps policy rate at 4.5%

Norway’s central bank decided to maintain the policy rate at 4.5 per cent following its monetary policy and financial stability committee meeting on August 14, 2024.

Governor Ida Wolden Bache indicated that the rate is expected to remain at this level for the foreseeable future.

The current policy rate, unchanged since December 2023, was raised significantly to address high inflation. While inflation has moderated from its peak, business costs continue to rise, potentially slowing further disinflation.

The Norwegian economy has cooled, with low growth and a slight increase in unemployment despite high employment levels.

The committee expressed concerns about prematurely lowering the policy rate, which could result in inflation staying above target for an extended period. Conversely, an overly restrictive policy might dampen the economy more than is necessary.

Since the last report in June, inflation has been lower than anticipated, and unemployment is slightly higher; however, the krone has depreciated more than expected.

The committee emphasised the need for a tight monetary policy to achieve the inflation target within a reasonable timeframe. Future rate decisions will depend on evolving economic conditions, including the krone’s performance and inflation trends.

The committee will review these factors and update forecasts at its next meeting in September 2024.

Attribution: Norges Bank 

Subediting: M. S. Salama