By Terje Solsvik
OSLO (Reuters) – Norges Bank, the Central Bank of Norway has, against all expectations, reduced its main key rate of 25 basis points on Thursday, to 4.25%, the first drop in loan costs in five years in the country.
“The economic prospects are uncertain, but if the economy evolves generally as currently planned, the key rate will be further reduced during 2025,” wrote Norges Bank in its monetary policy press release.
The Norwegian crown weakened at 11.55 against the euro at 8:23 am GMT, against 11.48 just before the announcement of Norges Bank.
In May, Norges Bank maintained its 4.50%key rate, its highest level since 2008, after having postponed a long -standing monetary easing in March due to an unexpected increase in consumer prices.
Of the 26 economists interviewed as part of a survey carried out between June 11 and 16, 23 provided that Norges Bank would maintain its key rate at 4.50% on Thursday, while three expected a 4.25% drop.
“Inflation has decreased since the monetary policy meeting in March, and the inflation prospects for the coming year indicate lower than expected inflation,” said Ida Wolden Bache, government of Norges Bank, quoted in the bank’s press release.
“A prudent normalization of the key rate will allow inflation to return to its objective without creating restrictions in the more than necessary economy,” she added.
This decision comes before the September legislative elections, the latest polls suggests a renewal of the minority Labor government in power.
Norwegian Prime Minister Jonas Gahr Stoere praised the Central Bank’s decision, in an unusual public declaration.
“Norges Bank’s decision to lower its rates today is an encouraging news,” he said, said by the news agency NTB. “This is excellent news for all those who contracted a loan,” he added.
The Swiss National Bank (BNS) lowered its main key rate to zero on Thursday and the Bank of England (BOE) must make its decision at 11:00 GMT, the day after the status quo decided by the American Federal Reserve (Fed).
(Report Terje Solsvik, Mara Vîlcu for the , edited by Claude Chendjou)
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