Finance
Instant view: Norway's central bank delivers surprise rate cut
Published by Global Banking & Finance Review®
Posted on June 19, 2025
5 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 19, 2025
5 min readLast updated: January 23, 2026
Norway's central bank cut rates to 4.25%, surprising analysts. The crown fell, and future cuts are expected. This move aims to address inflation.
LONDON (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.
Norway's crown and government bond yields tumbled.
The dollar was up over 1% against the Norwegian currency, fetching 10.05 crowns, on track for its biggest daily rise in eight weeks. The euro was up 0.8% and was trading at 11.54 crowns.
Norwegian government bond yields fell as much as 10 basis points after the decision to 3.95%, their lowest since May 12.
COMMENTS:
KIT JUCKES, HEAD OF FX STRATEGY, SOCIETE GENERALE, LONDON:
"My first piece of frustration is that is that between their sovereign wealth fund and their monetary policy, they manage to not have a super-strong currency, that is really what they’ve managed to do. It's never quite as strong as you think it ought to be, but it's never quite cheap enough either."
"There are a lot of countries that live with highly valued currencies and there are plenty that don't benefit from lowly valued currencies in the big scheme of things. What policymakers loathe is currencies that move quickly and mess up their inflation target.
"In this trade war period, they are runaway top currency."
"We're going to write this on down as being one of those unsurprising, surprises that really annoy us."
OEYSTEIN DOERUM, CHIEF ECONOMIST, NORWAY'S CONFEDERATION OF NORWEGIAN ENTERPRISES, OSLO:
"Not only did the cut come earlier than expected, the interest rate path has also been lowered in the short term, and prices are now almost in for another rate cut, to 4%, at the September meeting, and a high probability of another cut, to 3.75%, at the December meeting. After that, the interest rate will fall to 3% by the end of 2028, which is actually slightly higher than indicated in the March report.
"In any case, this is good news for all indebted households who can take a vacation with a slightly lighter burden on their backs, and it will provide some support to the housing market and thus to a construction industry that has been struggling for a long time.
"The main justification is that inflation has fallen somewhat faster than Norges Bank envisaged in March. The (2%) target is in sight. But the central bank remains vigilant: if wage and price growth remain higher than projected, there will be fewer interest rate cuts. In that case, just note the bank's wage projections for the years 2026-28, 4.1%, 3.6% and 3.3%, respectively.
"It is also pleasing that the interest rate path is being adjusted downward despite the fact that mainland growth for this year is being increased, by four tenths, to a still modest 1.6%, close to our estimate. And that unemployment is expected to remain at relatively low levels.
"If this is the outcome, Norges Bank will have helped steer the Norwegian economy towards a soft landing, after the largest external cost shock in almost fifty years."
LEE HARDMAN, SENIOR CURRENCY ANALYST, MUFG, LONDON:
"The timing is surprising, we thought that they would wait a little longer, they hadn't been giving a strong signal that they would cut rates as soon as today, that's why the market has reacted as it has.
"Their justification is that underlying inflation is softer than expected creating more room for them to cut rates.
"The other part of the messaging is that the overall profile for rate cuts going forward hasn't changed a great deal, just the timing, so from that perspective that could dampen the sell off in the (Norwegian crown) once the dust settles and market participants get over the initial shock."
JAN VON GERICH, CHIEF MARKET STRATEGIST, NORDEA, HELSINKI:
"This was not something was expected by analysts but given an uncertain outlook you shouldn't exclude any outcomes.
"Given that this was surprise, the move could have been bigger in the crown.
"They are (Norges Bank) talking about normalisation, so today's move suggests that this process is happening faster-than-expected.
"The Fed now seems to be the odd one out in global central banks."
MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:
"It was clearly a surprise, the Norges Bank was the last hold out when it comes to hawkishness among G10 central banks.
"They hadn't actually pencilled a rate cut until the Autumn so I think it may just be a sign that they're shifting to a more proactive approach.
"And given all the uncertainty that we see, they're probably in quite a luxurious position where they feel if they deliver a cut now they can perhaps head off some potential weakness that may be coming down the track in the next couple of quarters.
"It's really a nod to a more proactive Norges Bank from here on out."
(Reporting by the Reuters Markets Team, Compiled by Dhara Ranasinghe)
Norway's central bank cut its policy interest rate by 25 basis points to 4.25%, marking its first reduction in borrowing costs in five years.
Following the rate cut, Norway's crown and government bond yields tumbled, with the dollar rising over 1% against the Norwegian currency.
The rate cut is seen as good news for indebted households, potentially easing their financial burden and providing support to the housing market.
The central bank justified the cut by noting that inflation has fallen faster than expected, bringing the 2% target within reach.
Analysts were surprised by the timing of the rate cut, as many expected the central bank to wait longer before making such a decision.
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