OSLO, Sept. 19 (Xinhua) -- Norway's central bank has decided to keep its policy rate steady at 4.5 percent, signaling stability in its ongoing efforts to curb inflation.
"The policy rate will likely remain at 4.5 percent through the end of the year," said Norges Bank Governor Ida Wolden Bache in a press release on Thursday.
The decision, made during a meeting of the central bank's Monetary Policy and Financial Stability Committee on Wednesday, reflects a continued commitment to managing inflationary pressures.
Over the past few years, Norway's central bank has significantly raised interest rates in response to surging inflation. Since December 2023, however, the rate has remained at 4.5 percent, with officials noting that the policy has helped cool the Norwegian economy and temper inflation.
The committee emphasized that maintaining a restrictive monetary policy is necessary to bring inflation back to target within a reasonable timeframe. "We are concerned that reducing the rate prematurely could leave inflation above target for too long. Conversely, tightening too much could overburden the economy," the committee said.
Bache echoed these sentiments, noting: "We believe it's essential to keep the policy rate at its current level for the foreseeable future, but the time for easing monetary policy is approaching."
The bank's forecast projects that the policy rate will stay at 4.5 percent through 2024, with gradual reductions expected in the first quarter of 2025. Economic growth is anticipated to pick up slightly in the coming years, while unemployment is expected to rise. Inflation is predicted to approach the central bank's 2 percent target by the end of 2027.
"There is still uncertainty regarding the outlook for the Norwegian economy," the committee stated, "Inflation has decreased significantly and has been lower than expected for some time, suggesting that underlying inflationary pressures may be weaker than anticipated. If inflation returns to target sooner, or if the economy slows more sharply, we may reduce the rate faster than currently forecast."
At the same time, the Norwegian krone has depreciated again, raising additional concerns. "Should the krone weaken further, or if capacity utilization increases, wage and price inflation could remain elevated for longer. In that case, a higher policy rate than currently anticipated may be necessary," the committee added. ■