INSTANT VIEW-Norway's central bank delivers surprise rate cut

LONDON, June 19 (Reuters) - Norway's central bank cut its policy interest rate by 25 basis points to 4.25% on Thursday, its first reduction of borrowing costs in five years, in a decision that took most analysts by surprise.

Norway's crown and government bond yields tumbled.

The dollar was up over 1.5% against the Norwegian currency, fetching 10.08 crowns NOK=D3, on track for its biggest daily rise in eight weeks. The euro jumped 0.9% and was trading at 11.56 crowns EURNOK=D3.

Norwegian government bond yields NO10YT=RR fell as much as 10 basis points after the decision to 3.95%, their lowest since May 12.

COMMENTS:

LEE HARDMAN, SENIOR CURRENCY ANALYST, MUFG, LONDON:

"The timing is surprising, we thought that they would wait a little longer, they hadn't been giving a strong signal that they would cut rates as soon as today, that's why the market has reacted as it has.

"Their justification is that underlying inflation is softer than expected creating more room for them to cut rates.

"The other part of the messaging is that the overall profile for rate cuts going forward hasn't changed a great deal, just the timing, so from that perspective that could dampen the sell off in the (Norwegian crown) once the dust settles and market participants get over the initial shock."

JAN VON GERICH, CHIEF MARKET STRATEGIST, NORDEA, HELSINKI:

"This was not something was expected by analysts but given an uncertain outlook you shouldn't exclude any outcomes.

"Given that this was surprise, the move could have been bigger in the crown.

"They are (Norges Bank) talking about normalisation, so today's move suggests that this process is happening faster-than-expected.

"The Fed now seems to be the odd one out in global central banks."

MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:

"It was clearly a surprise, the Norges Bank was the last hold out when it comes to hawkishness among G10 central banks.

"They hadn't actually pencilled a rate cut until the Autumn so I think it may just be a sign that they're shifting to a more proactive approach.

"And given all the uncertainty that we see, they're probably in quite a luxurious position where they feel if they deliver a cut now they can perhaps head off some potential weakness that may be coming down the track in the next couple of quarters.

"It's really a nod to a more proactive Norges Bank from here on out."

KENNETH BROUX, HEAD OF CORPORATE RESEARCH FX AND RATES, SOCIETE GENERALE, LONDON:

"Surprise is the right word, I think the scale of the recent appreciation of the krone (bear down on inflation) gives them a bit more confidence and brings forward today's cut. They lowered the CPI forecast for 2026 by 0.5 percentage points to 2.2% and 2027 by 0.2 percentage points to 2.3%."