Norges Bank's interest rate decision is due on Thursday. Economists unanimously expect the key rate to remain unchanged now, but a cut in September.

Both NHO, Statistics Norway and a number of economists and analysts at banks expect Norges Bank to keep the key interest rate unchanged at 4.5 percent when they announce their decision on Thursday at 10 a.m.

They are unanimous in their expectation that there will be a rate cut in September and possibly another cut in December. The policy rate has been unchanged since December 2023.

– We expect two interest rate cuts this year and three next year. More unemployed people, lower underlying inflation, as well as lower demand and lower interest rates internationally, are pulling in the direction of lower interest rates here at home, says research manager Thomas von Brasch at Statistics Norway (SSB).

Waiting to conclude on recovery

Despite Norges Bank writing in its report to the regional network that there is good momentum in the Norwegian economy these days, and that this is expected to continue, several economists believe that the central bank will probably wait a bit before cutting interest rates.

DNB points out in its analysis that the monthly inflation figures have varied a lot recently, and that it is therefore too early to conclude that the upturn is not just temporary.

– This means that the central bank is in no hurry to lower the interest rate. However, we are strengthened in our belief that there will be a cut in September, and we expect a slight downward adjustment of the interest rate path, writes DNB.

Chief economist Øystein Dørum at the Confederation of Norwegian Enterprise (NHO) is somewhat more cautious and believes that more of the interest rate cuts will not come until next year.

– It seems as if the central bank wants to be careful not to let up too early. We therefore expect the first interest rate cut in September, and that there will only be one interest rate cut this year, says Dørum.

Something speaks for

There is still a small probability of an interest rate cut on Thursday. DNB points out that interest rates among Norway's trading partners have fallen recently, and that core inflation in Norway has been lower than expected recently. This could argue for an interest rate cut already now.

The person who is the furthest along in predicting interest rate cuts now is chief economist Jan Ludvig Andreassen at Eika Gruppen, writes E24.

– It will probably end up with cuts. Based on expectations, Norges Bank can justify waiting until September, but the risk picture – especially for the krone exchange rate, where there is a great risk of it strengthening uncomfortably – suggests that it should be cut now, says Andreassen.

The krone has not been stronger than it is now in almost two years, and it has strengthened significantly against the dollar, which has also weakened against other currencies. The krone has also strengthened somewhat against the euro, but not quite as much.

NHO explains that lower interest rates abroad mean that interest rates can be lowered in Norway without the krone exchange rate weakening.

Lower inflation after high growth this winter

Last week, the price and inflation figures for the past twelve months, from May to May, were released. At that time, core inflation, which Norges Bank uses as a basis for interest rate policy, was 0.2 percentage points lower than in April. It ended at 2.8 percent over the past year, which was a larger decline than expected.

Before the interest rate decision in March this year, many predicted a long-awaited interest rate cut. Norges Bank had also signaled this for a long time. However, nothing came of it, and interest rates have remained unchanged.

The reason was that price inflation in February was higher and increased more than expected. It was 3.6 percent, far above Norges Bank's inflation target of 2 percent.

Central Bank Governor Ida Wolden Bache said in March that she still believed in interest rate cuts during the year, and that the interest rate would end up at around 4 percent by the end of the year.

After the interest rate decision on Thursday, the next decision will be made on August 14. On Thursday, September 18, there will be another interest rate decision and a new monetary policy report where Norges Bank will present updated forecasts, as they do at every other interest rate meeting. That is when economists expect the cut.