Norges Bank Surprises With Rate Cut and Hints at Further Easing This Year

By Dominic Chopping

Norway's central bank unexpectedly cut its key policy rate to 4.25% and hinted at further easing later this year as inflation begins to move lower.

Economists polled by The Wall Street Journal had expected Norges Bank to remain on hold at 4.5%, given that economic growth is picking up, wages are rising and inflation remains elevated.

But in a statement Thursday, Norges Bank noted that inflation has declined since its March meeting and the outlook for the coming year indicates lower inflation than it had previously expected.

Core inflation in the country fell from 3.4% in March to 2.8% in May and the bank said a restrictive monetary policy is still needed to bring inflation down to the 2% target, but that borrowing costs can now begin to come down.

"A cautious normalization of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary," said Governor Ida Wolden Bache.

The central bank's forecast suggests the policy rate will decline to just below 4% at the end of 2025 and to about 3% toward the end of 2028.

Inflation is projected to move down and be close to 2% in 2028.

Write to Dominic Chopping at [e-mail]

(END) Dow Jones Newswires

06-19-25 0449ET