Rate decision November 2024
At its meeting on 6 November 2024, the Committee decided to keep the policy rate unchanged at 4.5 percent.
Policy rate kept unchanged at 4.5 percent
Norges Bank’s Monetary Policy and Financial Stability Committee decided to keep the policy rate unchanged at 4.5 percent at its meeting on 6 November.
“The policy rate will most likely be kept at 4.5 percent to the end of 2024,” says Governor Ida Wolden Bache.
In recent years, the policy rate has been raised significantly to bring down inflation. Since December 2023, the policy rate has been held at 4.5 percent. The interest rate has contributed to cooling down the Norwegian economy and to dampening inflation. Unemployment has edged up from a low level. Inflation has declined markedly, but the krone depreciation in recent years and the rapid rise in business costs are likely to restrain further disinflation.
The Committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon. The forecasts presented in the September Report indicated a gradual reduction in the policy rate from the first quarter of 2025. The outlook for the Norwegian economy does not appear to have changed materially since the previous monetary policy meeting. In its discussions up to this monetary policy meeting, the Committee gave weight to the fact that inflation has slowed faster than expected over the past year and that it was also lower in September than projected. On the other hand, international policy rate expectations have increased, and the krone has been a little weaker than assumed.
There is uncertainty about future developments in the Norwegian economy. The Committee will have received more information about developments ahead of its next monetary policy meeting in December, when new forecasts will be presented.
New forecasts have not been prepared for this monetary policy meeting. Monetary Policy Report 4/24 will be published along with the monetary policy decision on 19 December 2024.
Rate effective from 8 November 2024:
- Policy rate: 4.5 %
- Overnight lending rate: 5.5 %
- Reserve rate: 3.5 %
Contact:
Press telephone: +47 21 49 09 30
Email: presse@norges-bank.no
The policy rate will likely be kept unchanged to the end of the year
Introductory statement by Governor Ida Wolden Bache at the press conference following the announcement of the policy rate on 7 November 2024.
Chart: Policy rate kept unchanged at 4.5 percent
The Monetary Policy and Financial Stability Committee has decided to keep the policy rate unchanged at 4.5 percent.
Norges Bank is tasked with keeping inflation low and stable. The operational target is inflation of close to 2 percent over time. We are also mandated to help keep employment as high as possible and to promote economic stability.
After inflation surged two and half years ago, we have raised the policy rate significantly, and since December last year the policy rate has been held at 4.5 percent. The interest rate has contributed to cooling down the economy and to dampening inflation.
If the economy evolves as currently envisaged, the policy rate will be held at today’s level to the end of the year. At the same time, we are approaching the time to lower interest rates. The forecast presented at the previous monetary policy meeting in September, indicated that the policy rate would be gradually reduced from the first quarter of next year. We have not made new forecasts for this monetary policy meeting, but the overall outlook for the Norwegian economy does not appear to have changed materially since September.
Chart: International inflation has declined markedly from its peak
Internationally, central banks appear to have tackled inflation without large costs in the form of high unemployment. In many trading partner countries, inflation is now back at around 2 percent.
Many central banks have started reducing their policy rates. Markets expect further rate cuts internationally over the next year but not to the same extent as in September. US interest rates have risen sharply in recent weeks.
Chart: Inflation is moving down
The inflation outlook for Norway also indicates that we will be able to return inflation to target without a large increase in unemployment. Inflation has declined markedly from its peak and has slowed faster than projected over the past year. Consumer price inflation peaked at 7.5 percent and is now down to 3 percent, which is a little lower than we envisaged in September.
But inflation is still above our target, and we expect that some factors will restrain further disinflation. Wage growth is high, and combined with low productivity growth, this means higher business costs.
Chart: The krone has depreciated
Moreover, the krone depreciated markedly in the period to summer last year. A weaker krone means higher import prices. The krone is now a little weaker than before the monetary policy meeting in September and a little weaker than expected. The depreciation has been particularly pronounced against the US dollar, which has appreciated against many currencies in recent weeks. The dollar appreciated further in the hours following the US election.
Chart: Modest rise in unemployment
Since we started raising the policy rate, unemployment has edged up from a very low level. At the end of October, registered unemployment was 2.1 percent, in line with our September projection. Unemployment is still a little lower than in the period before the pandemic, and the number of job vacancy postings is high.
Chart: The policy rate will likely be held at today’s level to the end of the year
The Committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon. The Committee is concerned with the possibility that if the policy rate is lowered prematurely, inflation could remain above target for too long. On the other hand, an overly tight monetary policy could contract the economy more than needed. When we set the policy rate, we have to balance these trade-offs.
The economic outlook is uncertain. The Committee will have received more information about economic developments ahead of its next monetary policy meeting in December, when new policy rate forecasts will be presented.
Press conference rate decision November 2024
Monetary policy assessment
Norges Bank’s Monetary Policy and Financial Stability Committee decided to keep the policy rate unchanged at 4.5 percent at its meeting on 6 November. Based on the Committee’s current assessment of the outlook, the policy rate will most likely be kept at that level to the end of 2024.
In the September 2024 Monetary Policy Report, which was published on 19 September, the Committee’s assessment was that the policy rate would most likely be kept at 4.5 percent to the end of 2024. The forecast indicated that the policy rate would gradually be reduced from the first quarter of next year. Unemployment was expected to edge up, while inflation was projected to slow and approach 2 percent towards the end of 2027.
Further slowing of international inflation
Consumer price inflation among Norway’s main trading partners has slowed considerably over the past couple of years and is now close to inflation targets. Core inflation is somewhat higher than headline inflation and has moved broadly in line with the projection in the September Report. Oil and gas prices have risen somewhat since the previous Report. Freight rates have declined since summer but are still higher than at the beginning of the year.
GDP growth among Norway’s main trading partners was low through 2023. So far this year, growth has picked up somewhat and appears to be a little stronger than projected.
Since the September Report, euro area, US and Swedish policy rates have been lowered. The market expects further rate cuts, but international policy rate expectations have increased since the previous Report. US interest rates have increased sharply. Policy rate expectations for Norway have also increased and somewhat more than for trading partners. Market pricing indicates expectations of a policy rate cut in Norway in the course of the first quarter. Since the previous Report, the krone has depreciated slightly and has been slightly weaker than assumed. The US dollar has appreciated since the previous Report and appreciated further in the hours following the US election.
Import-weighted exchange rate index. I-44
Source: Norges Bank
Slightly higher unemployment
Growth in the Norwegian economy was low through last year and has remained low so far this year. High inflation and increased interest rates have led to lower purchasing power and weak growth in household consumption. In addition, housing construction has shown a considerable decline. Growth in household consumption picked up in spring, and goods consumption increased further between July and August. House prices have increased so far this year, and activity in the secondary housing market is high. So far this year, the number of new home sales is slightly higher compared with the same period in 2023, but the level of housing starts is still low.
Government spending plans imply slightly higher public spending in 2025 than in 2024, and a little higher than assumed in September.
Registered unemployment has edged up, reaching 2.1 percent in October, as projected. LFS employment indicates that unemployment has been stable at 4 percent since March 2024. The number of job vacancy postings is still high.
Slightly lower inflation than projected
Inflation in Norway has declined markedly from its peak but is still above target. In September, the 12-month rise in the consumer price index (CPI) was 3.0 percent, which was higher than in the previous month but a little lower than projected in the September Report. The 12-month rise in the CPI adjusted for tax changes and excluding energy products (CPI-ATE) decelerated to 3.1 percent, which was also a little lower than projected. The average of other underlying inflation indicators has decreased.
Consumer prices. 12-month change. Percent
Sources: Statistics Norway and Norges Bank
Policy rate unchanged at 4.5 percent
The operational target of monetary policy is annual consumer price inflation of close to 2 percent over time. Inflation targeting shall be forward-looking and flexible so that it can contribute to high and stable output and employment and to countering the build-up of financial imbalances.
In recent years, the policy rate has been raised significantly to bring down inflation. Since December 2023, the policy rate has been held at 4.5 percent. The interest rate has contributed to cooling down the Norwegian economy and to dampening inflation. Unemployment has edged up from a low level. Inflation has declined markedly, but the krone depreciation in recent years and the rapid rise in business costs are likely to restrain further disinflation.
The Committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon. The forecasts presented in the September Report indicated a gradual reduction in the policy rate from the first quarter of 2025. The outlook for the Norwegian economy does not appear to have changed materially since the previous monetary policy meeting. In its discussions up to this monetary policy meeting, the Committee gave weight to the fact that inflation has slowed faster than expected over the past year and that it was also lower in September than projected. On the other hand, international policy rate expectations have increased, and the krone has been a little weaker than assumed.
There is uncertainty about future developments in the Norwegian economy. The Committee will have received more information about developments ahead of its next monetary policy meeting in December, when new forecasts will be presented.
The Committee unanimously decided to keep the policy rate unchanged at 4.5 percent. Based on the Committee’s current assessment of the outlook, the policy rate will most likely be kept at that level to the end of 2024.
Ida Wolden Bache
Pål Longva
Øystein Børsum
Ingvild Almås
Steinar Holden
6 November 2024