MNI BRIEF: IMF Says Norges Bank Should Be Cautious Over Easing

The International Monetary Fund  said Norges Bank should "should proceed cautiously with monetary policy normalisation” with getting inflation back to target the most pressing near-term issue, it said in its Article IV economic assessment.

Norges Bank cut for the only time this cycle in June, taking the policy rate to 4.25%, and there are doubts over the timing of the next cut. The IMF's baseline scenario is for headline and core inflation to fall to 2.2% and 2.6% by the end of this year and to only hit target by 2027. (See MNI INTERVIEW: Cut Surprise Just Timing Issue -Norges Governor )

The IMF also said Norges Bank should expand the use of scenario analysis. 

The IMF noted that "the government’s fiscal stance has become increasingly expansionary," although withdrawals from the sovereign wealth have been below the 3% target, and it forecast the non-oil deficit to reach around 13% of mainland GDP. (See MNI INTERVIEW: Fiscal Rule To Stay After Tight Norway Election )