Wednesday, March 14, 2012

Norway Central Bank Cuts Policy Rate 25bps to 1.50%

Norway's central bank, Norges Bank, cut its key monetary policy rate by 25 basis points to 1.50% from 1.75% previously.  The Bank's Governor, Oystein Olsen, said: "The continuing downturn abroad and the strong krone are contributing to keeping inflation low and are weighing on growth in Norway. Against this background, the Executive Board has decided to reduce the key policy rate."  Further noting: "The current outlook suggests that the key policy rate may remain low longer than projected earlier. There is a high level of uncertainty regarding economic developments, and we have monetary policy leeway in both directions."

At its previous meeting the Bank slashed interest rates by 50 basis points, after increasing the interest rate by 25 basis points to 2.25% in May last year.  The Bank expects inflation to remain relatively low in relation to the 2.5 percent inflation target; Norway reported annual inflation of 1.2% in February this year, compared to 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 last year.  

Norway's economy grew by 0.6% in the December quarter (0.8% in Q3, 0.5% in Q2, and -0.5% in Q1 last year), placing GDP growth at 1.5% on an annual basis (4% in Q3, -0.4% in Q2, and 0.9% in Q1). The Norwegian krone has weakened about 1% against the US dollar over the past year, while the USDNOK exchange rate last traded around 5.82


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