Norway's central bank kept its benchmark interest rate unchanged at 4.50% on Thursday, as unanimously expected by analysts, and said the cost of borrowing would likely stay at that level "for some time ahead".
The prospects for the Norwegian economy did not appear to have changed materially since December, Norges Bank's monetary policy committee said in a statement, while adding it would take time before the full effects of previous rate hikes are seen.
"The committee assesses that the policy rate is now sufficiently high to return inflation to target within a reasonable time horizon," Norges Bank Governor Ida Wolden Bache said.
The Norwegian crown strengthened to 11.34 against the euro at 1013 GMT, from 11.38 just before the announcement.
The central bank in December raised the benchmark rate in a surprise decision even as inflation had come off earlier highs, aiming to stamp out price pressures and shore up the currency.
"Monetary policy is having a tightening effect, and the economy is cooling down," Norges Bank said on Thursday.
"At the same time, business costs have increased considerably in recent years, and continued high wage growth and the crown depreciation through 2023 will likely restrain disinflation," it added.
Norway's core inflation stood at 5.5% year-on-year in December, a 15-month low, down from a record 7.0% last June but still exceeding the central bank's goal of 2.0%.
The central bank did not provide fresh economic forecasts or a new forward rate curve. Those are due to be updated when the next policy decision is announced on March 21.
While Norges Bank has kept the door ajar to a potential future rate hike, its main scenario as communicated last month is for rates to start falling towards the end of 2024 as inflation subsides.
The central bank's December forecast had indicated that an initial rate cut would come in the autumn of 2024, but also left open the possibility of different outcomes, Bache said on Thursday.
"If cost inflation remains elevated, or the crown depreciates again, inflation may remain high for longer than previously projected. In that case, the committee is prepared to raise the policy rate again," Bache told a press conference.
"If there is a more pronounced slowdown in the Norwegian economy or inflation declines more rapidly, the policy rate may be lowered earlier than envisaged in December," she added.
A majority of economists participating in the Reuters poll predicted there would be one rate cut in the July-September quarter of 2024 and another one in the final three months, each by 25 basis points, bring the benchmark rate to 4.0% at the end of the year.
Money market rates, meanwhile, indicated that Norges Bank will deliver four rate cuts this year, but this is likely to prove incorrect, Nordea Markets wrote in a note to clients, adding that a first reduction would come only in September.
