In a move diverging from previous suggestions of a December rate hike, Norges Bank, Norway's central bank, decided to maintain its policy rate at 4.25% today. The decision, influenced by potential declines in underlying inflation, marks a shift from September's guidance and indicates a possible rate stabilization.
Analysts had predicted the bank would hold borrowing costs at this 15-year high, which aligns with the central bank's decision. Despite faster-than-expected inflation deceleration since August, a weakening krone could increase imported consumer price growth, posing a challenge for Governor Ida Wolden Bache and her team.
The Monetary Policy and Financial Stability Committee, which had hinted at a rate increase, is set to release a comprehensive forecast next month. Policymakers may raise rates depending on economic conditions but have left open the possibility of maintaining rates if underlying inflation decreases. The rate was previously predicted to peak at around 4.5% after one more hike.
The fossil-fuel-rich Norwegian economy, a G-10 member, is cooling due to extended monetary tightening.
Norway's central bank's stance mirrors the Federal Reserve's decision under Jerome Powell to keep interest rates unchanged. The krone's weakness, partly due to slower tightening compared to the Fed and the European Central Bank, suggests that Norway might keep the key rate high for longer than larger central banks.
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