Norwegian Krone: Why is gradual disinflation delaying rate cuts? – Nomura

An extended period of unchanged rates remains the outlook of Nomura strategists for Norges Bank, with no further changes expected in 2026–2027. In November, the central bank held its policy rate at 4.50% while indicating that it was prepared to raise rates again if necessary. Given Norway’s very gradual disinflation, the strategists expect the next move to be a cut, likely only from 2028.

Is Norges Bank set for a prolonged rate pause?

"Norges Bank left its policy rate unchanged at 4.50% at its November meeting, as we and consensus expected."

"The Governor’s guidance was that “it will likely be necessary to keep the policy rate elevated for a time, and we are prepared to raise the policy rate if needed to bring inflation down to target within a reasonable time horizon”. This is in line with what we expected and similar to the guidance from September."

"In the minutes accompanying today’s announcement, policymakers highlighted concerns that inflation has remained above target for several years and that the rapid rise in business costs in recent years will likely contribute to keeping inflation elevated ahead."

"Therefore, even if underlying inflation falls towards 2%, we think the bar to the first Norges Bank rate cut is quite high, as policymakers will want to see evidence of a sustained slowdown in price growth."

"In our central forecast, we believe that the next move from Norges Bank is likely to be a cut. However, this is unlikely to occur until 2028 at the earliest, as we forecast the disinflation process in Norway to be very gradual."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)