Norges Bank postpones the highly anticipated kickoff of its loosening cycle in March

Norges Banks retracts previously announced forward guidance: At its meeting on 26 March, Norges Bank held fire, leaving the sight deposit rate unchanged at a 17-year high of 4.50%. The decision to hold, while a walk-back from January’s meeting forward guidance, had been priced in by markets following the release of February inflation data on 10 March.

Surprise rise in inflation leads to first rate cut postponement: Norges Bank cited the recent rise in inflation, which was notable and “markedly higher” than expected, as the key driver behind the hold. While the overall picture of inflation is that it has slowed from its peak, it remains above the Bank’s 2.0% target. Moreover, Norges Bank noted that recently strong rises in business costs and higher-than-projected wage growth in 2024 are likely to stoke inflation ahead.

Forward guidance suggests easing ahead: Norges Bank forecasts that its policy rate will end the year at around 4.00%. Our Consensus also turned more hawkish and is now for around 75 basis points of reductions overall in 2025, instead of the 100 basis points worth of cuts penciled in after January’s meeting. The Bank will reconvene on 7 May, with the decision to be announced the following day.

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