Thursday, December 15, 2011

Norway Central Bank Slashes Rate 50bps to 1.75%

Norway's central bank, Norges Bank, dropped its key monetary policy rate by 50 basis points to 1.75% from 2.25% previously.  The Bank's Deputy Governor, Jan F. Qvigstad, said: "The turbulence in financial markets has intensified and external growth is now expected to be clearly weaker, particularly in the euro area. In order to dampen the impact on the Norwegian economy, the Executive Board has decided to lower the key policy rate."  The Bank further noted: In order to guard against an economic setback and even lower inflation, we are of the view that a reduction in the key policy rate is now appropriate."

At its previous meeting the Bank held the key policy rate unchanged, after increasing the interest rate by 25 basis points to 2.25% in May.  The Bank expects inflation to remain relatively low, but to progress towards the 2.5 percent inflation target; Norway reported annual inflation of 1.6% in September, 1.3% in August, 1.6% in July, 1.3% in June, 1.6% in May, and 1.3% in April this year.  

Norway's economy grew by 0.4% in the June quarter (-0.6% in Q1 this year), placing GDP growth at -0.4% on an annual basis (+0.9% in Q1). The Norwegian krone has weakened about 3% against the US dollar this year, while the USDNOK exchange rate last traded around 5.98


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