Norges Bank holds fire in January, as expected

Norges Bank remains an outlier among Western central banks: At its meeting on 22 January, Norges Bank stood pat, leaving the policy rate at a 17-year high of 4.50%. The decision to hold was unanimous and had been priced in by markets as the Bank stuck to the forward guidance it announced at its December meeting.

Monetary policy drivers: The Bank assessed that restrictive monetary policy was still necessary to stabilize inflation around its 2.0% target. Moreover, Norges Bank noted that recent developments have driven markets to expect smaller interest rate cuts abroad than earlier projected. Still, core inflation and unemployment have largely progressed in line with the Bank’s expectations since its last meeting in December, while headline inflation cooled more than anticipated—factors favoring the start of the easing cycle in the very near future.

Time for policy easing nears: Norges Bank’s forward guidance echoed its last meeting, stating that the first rate reduction will likely take place at its next meeting on 26 March—with the decision to be announced the following day. The majority of our panelists see the Bank kicking off its loosening cycle with a 25 basis point reduction, while the rest have penciled in a more aggressive 50 basis point cut. Overall in 2025, our Consensus is for around 100 basis points of cuts.

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