Norway's central bank kept its policy interest rate on hold at 4% today, as unanimously predicted in a Reuters poll, and reiterated that, while it plans to reduce borrowing costs over the course of the year, it was not in a hurry to do so.
"The current geopolitical situation is tense and is causing uncertainty, including about the economic outlook," Governor Ida Wolden Bache said in a statement.
All 27 economists in the January 14-19 poll had predicted Norges Bank would keep rates on hold while a majority predicted it would make two 25-basis-point cuts before the end of the year.
Norges Bank began an easing cycle in June and cut the policy interest rate again in September, and said in December that it would likely reduce rates once or twice in 2026 and bring the policy rate down to 3% by the end of 2028.
The overall outlook had not changed materially since December, the policy committee said today.
"The outlook is uncertain, but if the economy evolves broadly as currently envisaged, the policy rate will be reduced further in the course of the year," it said.
"We continue to expect a rate cut to 3.75% in June, while emphasising that the forecast is uncertain," analysts at Handelsbanken wrote in a note to clients.
Norwegian core inflation rose unexpectedly in December to 3.1% year-on-year, up from 3% in November, and still above the official target of 2%, Statistics Norway data showed earlier in January.
It was primarily a rapid rise in the price of food and many services that kept inflation elevated, Norges Bank said.
"We are not in a hurry to reduce the policy rate further. Inflation is still too high. Inflation excluding energy prices has been close to 3% since autumn 2024," Bache said.
As expected, the central bank did not present updated forecasts for the economy.
"The committee will have received more information about economic developments ahead of its next monetary policy meeting in March, when new forecasts will be presented," it said.
The US Federal Reserve and the European Central Bank, as well as the central bank of Sweden, Norway's neighbour and one of its top trading partners, are all due to make interest rate announcements in the next two weeks.
