MNI BRIEF: Soft Krone Hampering Disinflation - Norges Head
MNI (- ) - The weakness of the krone has stopped inflation in Norway from falling as fast as elsewhere, Norges Governor Ida Wolden Bache said at an event in Washington, with the central bank projecting its first rate cut this cycle in Q1 2025.
Currency depreciation "has slowed the disinflation process. While CPI inflation rose less in Norway than among our main trading partners throughout 2022, inflation has since fallen at a slower pace," she said at a Peterson Institute for International Economics event, citing the declining importance of the petroleum sector and heightened geopolitical tensions leading to a flight from less liquid currencies as factors behind the currency's decline.
The Norges Governor also highlighted how the high level of indebtedness of Norwegian households made rate hikes more powerful than elsewhere, through the net interest income channel, partially offsetting the impact of krone weakness. She said that the time was approaching to start interest rate cuts.
She stressed that Norges Bank was flexible in its inflation targeting but was committed to keeping inflation expectations anchored in highly volatile times.