Norges Bank Holds Key Interest Rate at 4.25%

The Norges Bank maintained its key deposit rate at 4.25% during an interim meeting on Thursday, marking the second consecutive meeting without a change. The decision followed analyst expectations and a recent slowdown in core inflation, which reached a 1.5-year low with prices rising 2.7% over the previous two months.

Despite the cooling of underlying prices, the central bank indicated that inflation remains too high to rule out further tightening. Governor Ida Wolden Bache noted that domestic price pressures, specifically a tight labor market and high wage growth, persist. She stated that while slower inflation is welcome, it is too early to conclude the outlook has changed materially.

The bank had previously assigned equal probability to rate hikes in August and September. By holding the rate, the bank aligns with a regional trend of a wait-and-see approach to monetary policy, though officials maintain that it may still become necessary to raise the policy rate in the future.