Norway's central bank governor pledges to bring inflation down

OSLO, Feb 12 (Reuters) - Norway's central bank ‌is determined to ​bring ​consumer price inflation down to its 2% target, its governor said in a speech on Thursday, casting doubt on the prospect of further interest rate reductions.

Norges Bank ‌in 2025 began an easing cycle, cutting its policy rate by 50 ⁠basis points to 4.0%, and said in December it aimed to slowly reduce borrowing costs this year and towards ‌2028 as inflation was expected to ‌decline.

But Norway's annual core inflation accelerated unexpectedly in January to 3.4% year-on-year from 3.1% in December, which analysts said could force the central bank to call off its rate cuts, ​or even raise borrowing costs.

'HIGHER THAN WE HAD EXPECTED'

Economists polled by Reuters had on average predicted that core inflation would ease to 3.0% in January, while Norges Bank's estimate stood ⁠at 2.9%, and the above-forecast reading triggered a rally in Norway's currency against the euro.

"According to figures published this week, inflation ​increased in January and was higher than we had expected," Norges Bank Governor Ida Wolden Bache said in her annual speech on Thursday to ​government and business leaders.

"We will ensure that inflation is ‌brought back to 2%," she said.

Bache said the Norwegian economy's moderate upturn was expected to continue and that household purchasing power would continue to ⁠grow, but did not say how the latest inflation data would impact the central bank's interest rate forecasts.

"These past years have reminded us that the outlook can change abruptly. That is why we do not make ⁠any promises about the policy rate," she said.

Norges Bank is due to present its next rate decision and ​long-term policy outlook on March 26.

In her speech, Bache said Norges Bank will this year begin to provide more insights into its monetary policy committee's discussions, but without attributing specific views to each of its five ‌members.

"The goal is to provide more nuances and details than today," she said.

Bache said she supported a Finance Ministry plan for a periodical ‌review of the central bank's mandate, but warned against including goals such as wealth and income distribution or ⁠climate change in monetary policy.

Elsewhere, Bache ‌said Norway's $2.2 trillion sovereign wealth ​fund, which is operated by a unit of the central bank, faced conflicting expectations at home and abroad on responsible investments.

(Reporting by Terje Solsvik; editing by ‌Barbara Lewis)

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