The Central Bank of Norway is preparing for a moderate reduction in the key rate

Today, the Bank of Norway marked the transition to a softer monetary policy, hinting at the possible start of interest rate cuts as early as March. The Central Bank left the key rate at 4.5%, which coincided with experts' forecasts.

Following the example of other leading financial institutions in developed countries, the Bank of Norway is preparing to lower interest rates. It is expected that at the next meeting a decision will be made to reduce by 25 bps.

Despite the planned changes, the regulator stressed the need to maintain restrictive policies in order to achieve long-term goals. Although there are no revised forecasts in the new statement, the December estimates suggested a gradual reduction in the key rate. According to previous calculations, the rate may decrease to 3.8% by the end of 2025, reach 3.2% by the end of 2026 and decrease to 2.9% by the end of 2027.

Analysts noted that the expected rate of mitigation will be quite moderate. However, they stressed that central banks' forecasts are often not accurate enough when it comes to long time periods.

Given the dynamics of inflation, experts predict that the Bank of Norway will probably gradually reduce the rate by 25 bps once a quarter. This could lead to the key rate reaching 3% by mid-2026.