(Bloomberg) -- Norway’s central bank signaled it may delay plans to begin interest-rate cuts in the autumn after the krone weakened more than officials anticipated and the Nordic economy showed more signs of resilience to high borrowing costs. 

Norges Bank held the key deposit rate at 4.5%, the highest since December 2008, as predicted by all analysts in a Bloomberg survey. The economy may need to maintain constriction “for somewhat longer than previously envisaged,” the bank said.

The krone — one of the worst performers this year among the world’s most-traded currencies — strengthened as much as 0.6% to trade at 11.7316 against the euro at 12:53 p.m. in Oslo.

“The probability of an interest-rate cut in September is further reduced, and on the margin, the probability for the first rate cut to be postponed until 2025 has increased even a little further,” Sara Midtgaard, a senior economist with Svenska Handelsbanken AB, said in a note to clients. “We also note that Norges Bank is slightly more ready to hike its key policy rate instead, if necessary.”

A weakening of the krone — as other currencies gain — is posing a key challenge for the Norwegian policymakers even as inflation slows. Still, Governor Ida Wolden Bache said it was only one of the factors behind the outlook change, aside from higher economic activity, slightly faster than anticipated wage growth and higher rate expectations abroad.

“As we now judge conditions in the economy, there will not be a need to tighten policy further,” she said in an interview. “But of course we stress that there’s uncertainty about the outlook. And if it should prove to be necessary, then we are prepared to raise policy rates. But we also point to potential downside risks relating to activity in the economy and inflation.”

With the Federal Reserve this week shirking from any timeline for interest-rate cuts, peers such as Norges Bank face less room for maneuver. 

Any earlier move in Norway would risk weakening its currency further, fueling import prices. The krone is now about 3% lower in trade-weighted terms than officials anticipated in March. 

“When we look at the development in exchange rates since March, we have seen a broad strengthening of the US dollar and other currencies than the krone, which doesn’t indicate any Norway-specific factors behind this development,” Wolden Bache told reporters. “It is linked to expectations of fewer rate cuts in the US, that price growth there has been higher than expected and its economy remains robust.”

Output data for Norway’s mainland economy, which has suggested continued expansion at the start of the year, and recent wage increases that exceeded projections also back the case for Norges Bank to take a longer pause. 

Price growth has slowed more in the past two months than analysts expected, yet it still hovers close to 4% — and is forecast to remain the highest in the G-10 currency group this year, according to Bloomberg data.

“The krone may find some relief but the near-term outlook still appears challenging,” Charlotte Ong, European FX Strategist with HSBC Bank Plc, said in a note to clients. “Norges Bank has maintained its hawkish stance but more dovishness in other central banks, such as the Fed and the European Central Bank, may be needed for a more sustainable recovery.”

--With assistance from Joel Rinneby, Stephen Treloar, Alastair Reed, Niclas Rolander and Gina Turner.

(Updates with governor comments, details from first paragraph. A previous version corrected the currency move.)

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