MNI NORGES WATCH: Seen On Hold in Jan, Policy Dial Unchanged

Norges Bank is widely expected to leave its policy rate on hold at 4.0% on Thursday, with the decision coming just five weeks after its Dec 17 meeting, when the policy committee unanimously backed no change while steering to just one or two cuts in 2026.

January is an interim meeting, with no new economic projections, and while a compelling shift in the data or external environment could have triggered a cut this month, recent inflation data have been stronger than expected. 

The target core inflation measure, CPI-ATE, came in at 3.1% on the year in December, above the Bank's 3.0% forecast in the December Monetary Policy Report, while CPI was up 3.2% on the year, compared to the 2.9% forecast, with food inflation rising to 5.2% on the year, up 0.5 percentage points from November.

At that December meeting Governor Ida Wolden Bache said that "We are not in a hurry to reduce the policy rate" and the rate path projection terminated at 3.2% at the end of 2028, indicating only three or four 25-basis-point cuts throughout the forecast period.

February looks set to be the key month for indicators of wage growth. The TBU, Norway's technical committee for wage settlements, which establishes a pay baseline, is reportedly set to publish its assessment mid-month, with labour data out Feb 5.

U.S. TARIFFS

Norway has found itself in crossfire over Donald Trump’s push for Greenland, facing 10% tariffs for exports to the U.S. from Feb 1 with a threat of 25% from June 1. If questioned about the latest developments, Wolden Bache is likely to reaffirm the current policy guidance for "no hurry" to move policy. (See MNI: NORGES WATCH: No Hurry For Further Cut)

Previously, Norges Bank has downplayed the impact of tariffs on the mainland economy while highlighting the uncertain global outlook. Wolden Bache moved away from offering precise forward guidance after the Norwegian central bank faced criticism for being seen to steer to a March 2025 cut at the beginning of its easing cycle, which was then delayed until June. (See MNI INTERVIEW: Norges Bank Head Tilts Against Precise Guidance).