(Bloomberg) -- Easing inflation risks mean the “door is open” for Norway to start lowering borrowing costs earlier than March, economists at Danske Bank A/S said in a new forecast.
Norges Bank may already choose to move in January, or even December, as the threat of price gains resuming now appear to be “much lower than before,” but the bar for doing so is high, according to Danske’s latest Nordic outlook published on Wednesday. The bank slightly lowered its inflation forecast for Norway, expecting a core rate of 3.6% this year, 2.2% next year and 2% in 2026.
The central bank, which has maintained its key deposit rate at 4.5% for almost a year, will probably deliver a total of four quarter-point cuts next year, and then make further reductions to 2.5% by the end of 2026, the economists said.
In Sweden, where the central bank has already lowered the key interest rate to 2.75% in October from 4.0% in May, Danske predicts quarter-point cuts at each meeting through to June 2025, except for May. This will take borrowing costs to 1.75%, below the Riksbank’s own projections of the rate at 2.25% at that point, it said.
Still, “the Riksbank will need to walk something of a tightrope at the upcoming monetary policy meeting in December,” Danske said, as high power prices may begin to boost expectations for inflation.
Danske Bank’s Nordic GDP Forecasts:
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