Chart of the day - USDNOK (25.01.2024)

Norges Bank's Monetary Policy and Financial Stability Committee has decided to maintain the policy rate at 4.5%, with expectations to keep it at this level for the foreseeable future.

Rate effective from 26 January 2024:

• Policy rate: 4.5 %
• Overnight lending rate: 5.5 %
• Reserve rate: 3.5 %

This decision is based on the current economic outlook and balance of risks. Inflation remains significantly above the target, with underlying inflation high despite a recent decline. The Norwegian economy is experiencing low unemployment but weak economic growth, aligning with projections from the December 2023 Monetary Policy Report. The Norwegian krone has strengthened more than anticipated, but overall, the economic prospects for Norway haven't materially changed since the last report.

The Committee may consider reducing the policy rate when inflation decreases and economic conditions permit. The future of Norway's economy holds uncertainties. If inflation remains high or the krone depreciates further, inflation could stay elevated longer than expected, potentially leading to an increase in the policy rate. Conversely, a more pronounced economic slowdown or faster decline in inflation could lead to an earlier rate reduction than anticipated in December. 

The reaction on the USDNOK has been limited. The decision was expected by the market, Norges bank also did not communicate any major long-term policy changes. USDNOK remains in a rising upward channel above the nearest support level at 10.330. Source: xStation 5