MNI NORGES WATCH: On Hold, 2025 Cut Guidance May Be Retained

Norway’s central bank is set to leave rates on hold again this week, and, while there is a possibility that it could refine its guidance for a likely cut during the course of 2025 to something more specific, Governor Ida Wolden Bache may opt to again stress current economic uncertainty.

The deterioration and the disruption of global trade as a result of U.S. tariffs will clearly hit economic activity, prompting some analysts to anticipate that Norges Bank’s first cut will come in June, but May’s meeting lacks a new forecast round, which may argue against changing the guidance. (See MNI INTERVIEW: Trade Scenarios Cloud Outlook - Norges Head).

Norges Bank had earlier indicated it would begin its easing cycle in March, but unexpectedly high inflation led it to instead leave its policy rate at 4.5%, with Wolden Bache pointed to elevated uncertainty. The March rate projection was consistent with a decline in the policy rate to 4% by the end of the year. 

Inflation on the target CPI-ATE measure, which excludes tax changes and energy prices, was 3.4% in March, still markedly above the 2.0% target and March forecast showed it holding above target, albeit marginally, through to the end of the three year-forecast horizon.

Against this backdrop a cautious approach is likely although the mounting concerns over the weakness of the external economic outlook and its impact on the export intensive Norwegian economy may push Wolden-Bache to adopt a more dovish tone in her press briefing.