After five consecutive hikes, the Bank of Norway left its key rate unchanged on Thursday, at 2.75%, a short break before a “very likely” further tightening in March.
If inflation in the Scandinavian country remains high and well above the official monetary policy target, the Norwegian economy is showing signs of slowing down which justify a more gradual evolution of the rate, explained the central bank.
The future trajectory of key rates will depend on economic developments, explained the governor of the bank, Ida Wolden Bache, in a press release.
The policy rate will most likely be raised in March, she added.
The status quo announced Thursday was expected by most Norwegian economists while many of their international colleagues were counting on a further rise.
Faced with rising inflation, the Bank of Norway was, in September 2021, one of the first in the Western world to raise its key rate, which is now its highest since 2009.
Consumer prices remain at a high level, 5.9% in December. Criterion used by the central bank, core inflation (excluding energy and tax changes) amounted to 5.8% in the same month, far from the objective of around 2% assigned to monetary policy.
But the multiple rate hikes are beginning to have their effect, leading to an economic slowdown in the country, which could be accentuated by the recession expected this year in several important trading partners.
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We remain of the view that there will be another rate hike of 25 basis points in March, bringing the key rate to 3.00%, commented Marius Gonsholt Hov, economist at Handelsbanken.
But it will be the peak, in our view, although the risks are probably on the upside, he added.
The next rate announcement is scheduled for March 23.