Norwegians with big mortgages could breathe another sigh of relief on Thursday, after the country‘s central bank board refrained once again from raising interest rates. Rates are still expected to rise later this year, but Norges Bank’s Executive Board decided to keep its key policy rate at 0.50 percent unchanged for now.
“The outlook and balance of risks do not appear to have changed substantially since the March report (on monetary policy),” stated Norges Bank Governor Øystein Olsen in a press release Thursday morning. “This suggests keeping the key policy rate unchanged at this meeting.”
The last monetary policy report had determined that Norway’s economic upturn was continuing and that the “output gap” in the Norwegian economy was closing. “Underlying inflation was low, but rising capacity utilization was expected to push up price and wage inflation further out,” the bank stated.
That all led to the bank’s board suggesting that the key policy rate would most likely be raised after the summer of 2018. That assessment has been maintained: “The upturn in the Norwegian economy appears to be continuing broadly in line with the picture presented in the March report,” the board stated on Thursday. “Underlying inflation is below the inflation target, but the driving forces indicate it will rise.”
That iin turn can call for a rise in interest rates for the first time in two-and-a-half years. Norway’s key policy rate has been steady at 0.50 percent since March 2016.
Analysts and economists had widely predicted that the bank would leave the rate there for now. All five of the economists on newspaper Dagens Næringsliv (DN)‘s interest panel, for example, had predicted that interest rates would remain unchanged, and they were right. None of them recommended any increase in the key policy rate for now.
Many agree, however, that a rise may be warranted later this year. The bank board’s next interest rate assessment will be made just before the summer holidays begin in late June.