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Norges Bank awaiting... stabilization. Interest rate cuts only in the second half of the year?
Experts agree – the Norwegian central bank will adopt a wait-and-see stance. flickr.com / Norges Bank / CC BY-ND 2.0
This coming Thursday, June 19, Norges Bank will announce another decision regarding interest rates. According to most economists and market analysts, however, a rate cut should not be expected. The main interest rate, currently at 4.5%, will most likely remain at the same level as since December 2023.
In short
- Norges Bank will announce its interest rate decision on June 19.
- Most economists do not expect a rate cut.
- The main interest rate is currently 4.5%.
- Experts predict that cuts may occur only in the third quarter of 2025.
- High core inflation and concerns about the weakening Norwegian krone influence the bank's decisions.
Experts agree – the Norwegian central bank will adopt a wait-and-see stance. Nine out of ten economists interviewed by the E24 portal do not believe that central bank governor Ida Wolden Bache and Norges Bank will cut interest rates this week.
– Neither inflation data nor the regional network provide reasons to cut interest rates now – says chief economist Tore Grobæk Vamraak from Sparebanken Norge.
Only Jan Ludvig Andreassen from Eika Gruppen believes the interest rate will be cut this week. In his opinion, the risk picture – especially regarding the krone exchange rate – indicates that action should be taken now.
At the same time, analysts from Capital Economics also emphasize that Norges Bank remains cautious, fearing renewed price increases as a result of easing monetary policy too quickly.
According to specialists from Nordea Markets, the Norwegian Central Bank will not only keep interest rates unchanged in June but will also signal to the market that cuts will only be possible with clearer signs of declining inflation and stabilization in the labor market.
Although the US dollar is declining, the Norwegian krone cannot count on an exceptionally good period.Source: Photo Adobe Stock, standard license
Inflation, krone and increasing pressure
According to market expectations, the first interest rate cut may occur only in the third quarter of 2025, most likely in September.
One of the main factors influencing Norges Bank's decision is still high core inflation, which – although declining – remains above the inflation target of 2%. According to data from early June, inflation in Norway was 3.5%, a decrease compared to the beginning of the year, but still above the central bank's inflation target.
At the same time, monetary authorities fear excessive weakening of the Norwegian krone. Lowering rates under current conditions could further reduce the value of the national currency, potentially leading to higher prices for imported goods.
Additionally, pressure is increasing from households and the construction industry, which are feeling the effects of high financing costs. A slowdown in these sectors may eventually force the central bank to revise its strategy.
Sources: E24, Norges Bank, NTB, MojaNorwegia.pl