Norges Bank's monetary policy and financial stability committee unanimously decided to keep the key interest rate unchanged at 4,5%. As the committee is currently assessing the outlook and risk picture, the key interest rate is likely to remain at this level for an extended period of time.
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Interest rate unchanged in 2024
Increase in prices is clearly above target. The underlying price increase has slowed further but remains high. Unemployment is low, but economic growth is weak. Both price increases and economic activity were estimated roughly as estimated in the previous report. The crown is now stronger than expected. Overall, the outlook for the Norwegian economy does not seem to be improving significant changes since the previous report - as we read in the information from Norges Bank
- In our opinion interest rate is currently high enough that price dynamics will return to the target level within a reasonable time, says Central Bank President Ida Wolden Bache.
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Business costs have increased significantly in recent years
Monetary policy appears to be tightening and we see the economy cooling. At the same time, the costs of enterprises have increased significantly in recent years and persist tall stature wages and the weakening of the krone over the past year will likely slow the decline in price inflation. So it will probably be necessary keeping feet interest rates at a constant level for a long time. When price inflation declines and economic conditions dictate, we can start lowering interest rates again.
There is uncertainty about the further development of the Norwegian economy. If cost dynamics in enterprises remain high or the krona weakens again, price dynamics may remain high for longer than previously estimated. Then the commission is ready raise the interest rate again. If the Norwegian economy slows down more strongly or inflation falls faster, interest rates may be reduced earlier than we predicted in December.
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Source: Norges Bank, Photo: pixabay
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