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Investing.com - The Norges Bank’s upcoming interest rate decision has become less certain in recent weeks, according to a new research note from Bank of America (NYSE:BAC) released Wednesday.
Bank of America analysts note that while a September rate cut previously appeared highly likely, recent economic data has complicated the outlook for Norway’s central bank.
The research firm cites several factors supporting a hold decision, including stronger-than-expected economic growth in the first half of 2025, persistently high August inflation figures when excluding childcare costs, and strengthening labor market signals observed in the Norges Bank’s Regional Network survey.
The case for a rate cut remains substantial, with Bank of America highlighting four key supporting factors. These include a broadly unchanged growth outlook for the second half of 2025, limited evidence of additional inflationary pressures developing in the Norwegian economy, and the current policy rate’s high level compared to neutral rate estimates.
Bank of America also points to "soft guidance" previously issued by the Norges Bank that suggested a rate cut was forthcoming. This forward guidance, while not definitive, had contributed to market expectations for monetary easing at the September meeting.
The Norwegian central bank’s decision comes amid a complex economic backdrop, with policymakers balancing concerns about inflation persistence against the need to avoid unnecessarily restricting economic growth. The Norges Bank’s current policy rate stands significantly above what many economists consider the neutral rate for the Norwegian economy.
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