Norway Monetary Policy January 2021


Norway: Norges Bank keeps rates on hold in January

January 21, 2021

At its monetary policy meeting on 21 January, the Executive Board of Norges Bank unanimously decided to keep the sight deposit rate at 0.00%, marking the sixth consecutive meeting of unchanged rates. The decision follows 150 basis points of easing during 2020, culminating in May’s move to drop rates to zero.

The Bank’s wait-and-see approach came amid higher Covid-19 infection rates and stricter containment measures, which will have weighed on activity toward the end of 2020 and into the start of this year. Nevertheless, in its communiqué the Board maintained its carefully optimistic tone, noting that “vaccination is well under way, and economic growth is expected to pick up further out in 2021”. As such, the Bank decided to err on the side of caution and maintain interest rates at zero.

Looking forward, the Bank once again stated that based on its “current assessment of the outlook and balance of risks, the policy rate will most likely remain at [its current] level for some time ahead”.

Regarding the outlook, Lisa Alexandersson, Scandinavia economist at JPMorgan, see rates on hold throughout 2021, noting:

“We expect Norges Bank to starting raising the policy rate in 1Q22, which is in line with the central bank’s own projection. […] While the resilience in economic activity during the second wave of the virus, all else equal, is increasing the risk of an earlier start of the rate hikes, the pick-up in infections since the Christmas holidays with containment measures being extended as a result, could dampen the economic recovery Norges Bank is assuming to take place from February.“

However, Øystein Børsum, Jon Espen Riiser and Marlene Skjellet Granerud, economists at Swedbank, see the Bank hiking rates sooner, commenting:

“We expect that the strong economic recovery and the booming housing market will lead Norges Bank to hike its policy interest rate already in the autumn, well ahead of other central banks in developed countries. We expect the policy rate to rise from the current 0.00% to 0.75% by the end of 2022.”

The next monetary policy meeting is scheduled for 18 March.

FocusEconomics Consensus Forecast panelists currently project the sight deposit rate to end 2021 at 0.05% and 2022 at 0.29%.

Author:, Economist

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