Norwegian Central Bank Cuts Rate First Time Since Pandemic

Norway's central bank surprised markets by cutting its policy interest rate by 25 basis points to 4.25%, marking the first reduction in five years and the first since the pandemic. This unexpected move, driven by softer-than-expected inflation and a cautiously optimistic economic outlook, signals a shift from the bank's previously hawkish stance toward a more proactive approach amid global uncertainties. Officials indicated that further rate cuts are likely in 2025 if economic conditions develop as expected. The Norwegian krone weakened following the announcement, hitting its lowest levels against the euro since late May, while government bond yields also fell significantly. Market analysts view this decision as aligning Norway's monetary policy more closely with other developed nations and potentially initiating a broader easing cycle among G10 central banks. Overall, the rate cut reflects Norges Bank's attempt to balance inflation control with supporting economic growth in a changing global environment.