- Norway's policy rate on hold, as expected
- Central bank eyes cut later this year
- Says job of fighting inflation not fully completed
- Currency strengthens slightly after announcement
ARENDAL, Norway, Aug 14 (Reuters) - Norway's central bank kept its policy interest rate on hold at 4.25% on Thursday, as unanimously predicted by analysts in a Reuters poll, and reiterated plans to cut borrowing costs later this year.
Norges Bank, in a surprise decision, cut its key interest rate in June by 25 basis points to 4.25%, the first reduction in more than five years, and said there were more cuts to come due to a more benign inflation outlook.
"If the economy evolves broadly according as envisaged, we will lower the policy rate further in the course of the year," Governor Ida Wolden Bache told Reuters.
"We have not now made a decision about what to do in September (the next rate meeting). That will depend on the data coming in."
She underlined that it was difficult to interpret current data and there remained significant uncertainty about how U.S. tariffs would impact inflation.
"There is still uncertainty about the trade regime globally, and not least about the effects of those tariff increases that we have seen," Bache said in an interview.
"What we've seen so far is that growth among our main trading partners has, if anything, been higher than anticipated. But the numbers are difficult to interpret at the moment, and it remains to be seen how large those effects will be."
The monetary policy committee in June predicted it would make one or two quarter-point rate cuts in the second half of the year.
"The information we have received so far indicates that the outlook for the Norwegian economy has remained broadly in line with the outlook in June," Bache told a press conference earlier.
All 26 analysts in an August 8-11 poll expected rates to stay on hold this week and were unanimous in predicting a cut in September to 4.00%, and most also anticipated a cut in December to end 2025 on 3.75%.
"This is what we, and others expected... We believe the next rate cut will come as soon as September," said Oeystein Doerum, chief economist for the Norwegian Confederation of Enterprises.
The Norwegian crown currency initially strengthened against the euro following the 0800 GMT announcement, but later gave up most gains to trade at 11.90 per euro at 1012 GMT.
Before the June cut, the Norwegian policy stance had long contrasted with other Western central banks, most of which started cutting rates last year as growth slowed and inflation eased.
While the job of tackling Norwegian inflation has not been fully completed, the central bank does not want to restrict the economy more than needed.
"It will likely be appropriate to continue with a cautious normalisation of the policy rate ahead," Bache said.
Reporting by Gwladys Fouche in Arendal, editing by Terje Solsvik and Christina Fincher
Source: Reuters