OSLO (Reuters) -Norway’s central bank cut its policy interest rate by 25 basis points to 4.25% on Thursday, its first reduction of borrowing costs in five years, in a decision that took most analysts by surprise.
“The economic outlook is uncertain, but if the economy evolves broadly as currently projected, the policy rate will be reduced further in the course of 2025,” Norges Bank said in a statement.
The Norwegian crown currency weakened to 11.55 against the euro by 0805 GMT, from 11.48 just before the announcement.
Norges Bank in May maintained its interest rate at 4.50%, the highest level since 2008, after it postponed in March a long-planned monetary easing due to an unexpected rise in consumer prices.
Of the 26 economists in the June 11-16 poll, 23 predicted Norges Bank’s key interest rate would stay at 4.50% on Thursday, while three expected a cut to 4.25%.
“Inflation has declined since the monetary policy meeting in March, and the inflation outlook for the coming year indicates lower inflation than previously expected,” Norges Bank Governor Ida Wolden Bache said in a statement.
“A cautious normalisation of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary,” she added.
(Reporting by Terje Solsvik, editing by Gwladys Fouche)
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