Today’s announcement from Norges Bank indicated a shift towards easing monetary policy, with expectations to begin cutting interest rates in March. The central bank maintained its policy rate at 4.5%, aligning with the unanimous predictions of forecasters.
In a move that follows behind other developed market (DM) central banks, Norges Bank is now poised to reduce interest rates, likely starting with a 25 basis point cut at its next meeting.
Despite the anticipated change in direction, Norges Bank emphasized the continued necessity of a restrictive monetary policy stance.
While no new projections were released during Monday’s statement, the December forecasts suggested a gradual decline in the policy rate to an average of 3.8% by the fourth quarter of 2025, reaching 3.2% by the end of 2026 and 2.9% by the same period in 2027.
Analysts at Capital Economics have commented on the projected pace of loosening, labeling it as relatively slow. However, they also noted that central bank rate forecasts often lack reliability for periods extending beyond a few months.
Based on inflation trends, Capital Economics anticipates that the bank could implement quarter-on-quarter cuts of 25bp, ultimately bringing the policy rate down to 3% by mid-2026.
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