Norges Bank holds fire in January, meeting expectations

At its first scheduled meeting of 2024 on 24 January, the Executive Board of Norges Bank unanimously voted to leave the policy rate at a 16-year high of 4.50%. The move, which came on the heels of December’s surprise hike, had been priced in by markets, as the Bank did not deviate from the announced policy path. It has raised interest rates by a cumulative 450 basis points since September 2021.

The decision to hold was driven by the Bank’s assessment that inflation remains markedly above its “close to 2.0%” target. Past policy moves have succeeded in delivering the desired effect: Core inflation declined further in December and economic activity has cooled. The Bank’s assessment is that the current policy rate level is sufficient to consolidate both headline and core inflation’s downward trends and bring them to target “within a reasonable time horizon”.

Norges Bank suggested it would leave the policy rate at its current level when it convenes next on 20 March. In its communiqué, the Bank’s forward guidance stated that the policy rate “will likely be kept at that level for some time ahead”, likely until autumn, given the current balance of risks. The Bank stated it stood ready to either bring forward or delay the beginning of the loosening cycle, depending on changes to its baseline scenario. Half of our panelists expect the first rate cut as early as Q2, while the other half expects it in Q3.

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