MNI BRIEF: Norges Bank Delivers Surprise Policy Rate Cut

Norges Bank finally started its easing cycle, cutting the policy rate by 25bp to 4.25%, stating that if the economy evolved broadly as expected that the rate would be reduced further this year. 

The policy rate was set at 4.50% back in December 2023 and stayed there until now and analysts were largely anticipating another no change decision in June.  (see MNI NORGES WATCH: Seen On Hold, Eyes On September Cut Guidance )

Governor Ida Wolden Bache, however, said that the near term inflation outlook was softer than previously assumed and "a cautious normalisation of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary."

The forecasts in the Monetary Policy Report showed the policy rate easing gradually, to 3.6% in 2026, 3.2% in 2027 and 3.1% in 2028 with inflation on the target CPI-ATE measure 2.7% next year, down from 2.9% and 2.2% in 2027, down from 2.3% and unchanged at 2.1% in 2028.