Norges Bank Keeps Policy Rate Steady At 4.50%

The Norwegian central bank maintained its key interest rate for the third straight decision on Friday, as the current stance is needed for some time ahead in order to bring inflation back to the target within a reasonable time horizon.

The Monetary Policy and Financial Stability Committee, headed by Governor Ida Bache, decided to keep the policy rate at 4.50 percent, Norges Bank said in a statement.

The previous change in the rate was a 0.25 percent hike in December.

"Based on the Committee's current assessment of the outlook, the policy rate will likely be kept at today's level for some time ahead," Governor Ida Wolden Bache said.

The bank board observed that monetary policy is now having a tightening effect as the growth of the economy is low.

Besides, inflation is still above the bank's target range of 2.0 percent, although it is slowing. Recent data showed that Norway's inflation eased to 3.9 percent in March from 4.5 percent in February.

The bank reiterated that if a further increase in the policy rate is judged necessary to bring inflation down to target within a reasonable time horizon, the committee is prepared to raise the policy rate again.

"Inflation in Norway has been falling faster than Norges Bank expected for some time, but with the core rate still a long way above target, today's communications show that policymakers are not counting their chickens," Capital Economics economist Jack Allen-Reynolds said.

"While they now seem to envisage keeping interest rates unchanged until 2025, we still suspect that further declines in inflation will allow them to begin loosening monetary policy this year."

The next policy decision announcement is due on June 20.

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