COPENHAGEN (Reuters) -Norway’s central bank is expected to cut its policy interest rate twice more this year following last week’s surprise reduction in the cost of borrowing from a near 17-year high, a Reuters poll of economists showed on Tuesday.
Norges Bank on Thursday cut the rate by 25 basis points to 4.25% due to a more benign inflation outlook, a decision predicted by only by a small minority of economists, and said one or two more cuts could come by the end of the year.
Out of 24 analysts in a June 19-23 poll, 23 predicted that Norges Bank will lower its key interest rate to 4.00% in September, while one expected a cut in August.
A further cut to 3.75% by year-end was forecast by 18 economists, the poll showed.
Prior to last week’s cut, economists had expected the rate to end the year at 4.00%.
Norway’s policy stance has stood apart from that of other Western central banks, most of which began reducing rates last year as inflation waned while Norwegian wages and prices rose more than expected.
But core inflation in the Nordic country eased more than anticipated in April and May, falling to 2.8% year-on-year last month, below the central bank’s forecast of 3.1% although still above the country’s 2.0% target.
Nordea Markets said it predicted only one more cut this year and expected the rate to stay at 4.00% throughout 2026.
“Three rate cuts in the space of half a year would give a very strong stimulus for the Norwegian economy,” the brokerage said.
Brokers DNB Carnegie in a note to clients cautioned Norway’s monthly inflation readings had become more volatile over the past year and this reduced the predictability of underlying inflation.
“In this context, we believe the (central) bank placed too much emphasis on just two monthly (core inflation) prints,” DNB Carnegie said.
(Other stories from the June Reuters global economic poll)
(Reporting by Louise Breusch Rasmussen; polling by Aman Kumar Soni and Purujit Arun; editing by Terje Solsvik and Toby Chopra)
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