By Gwladys Fouche
ARENDAL, Norway (Reuters) -Norway’s central bank kept its policy interest rate on hold at 4.25% on Thursday, as unanimously predicted by analysts in a Reuters poll, and reiterated plans to cut borrowing costs later this year.
Norges Bank, in a surprise decision, cut its key interest rate in June by 25 basis points to 4.25%, the first reduction in more than five years, and said there were more cuts to come due to a more benign inflation outlook.
“The economic outlook is uncertain, but if the economy evolves broadly as currently envisaged, the policy rate will be reduced further in the course of 2025,” Norges Bank said in a statement on Thursday.
The monetary policy committee in June predicted it would make one or two quarter-point rate cuts in the second half of the year.
“The information we have received so far indicates that the outlook for the Norwegian economy has remained broadly in line with the outlook in June,” Governor Ida Wolden Bache said on Thursday.
All 26 analysts in an August 8-11 poll expected rates to stay on hold this week and were unanimous in predicting a cut in September to 4.00%, and most also anticipated a cut in December to end 2025 on 3.75%.
“This is what we, and others expected… We believe the next rate cut will come as soon as September,” said Oeystein Doerum, chief economist for the Norwegian Confederation of Enterprises.
The Norwegian crown currency strengthened to 11.87 against the euro by 0823 GMT, from 11.91 just before the announcement.
Before the June cut, the Norwegian policy stance had long contrasted with other Western central banks, most of which started cutting rates last year as growth slowed and inflation eased.
While the job of tackling Norwegian inflation has not been fully completed, the central bank does not want to restrict the economy more than needed.
“It will likely be appropriate to continue with a cautious normalisation of the policy rate ahead,” Bache said.
(Reporting by Gwladys Fouche in Arendal, editing by Terje Solsvik and Christina Fincher)
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