Thursday, September 18, 2014

Norway holds rate, drops warning of possible rate cuts

    Norway's central bank maintained its policy rate at 1.5 percent, as expected, and confirmed its guidance from June that it expects the rate to remain at the current level until the end of 2015 before it starts to gradually increase.
    But Norges Bank, which last cut its rate in March 2012, dropped its warning from June that a further weakening of the outlook for the country's economy could warrant a rate cut.
    "The outlook for inflation and output is little change since June," Norges Bank Governor Oeystein Olsen in a statement, adding that growth prospects were a bit weaker than previously expected and an expected increase in policy rates abroad had been pushed further out.
    But in Norway, inflation and output had risen further than forecast in June, though some of this reflects temporary conditions, Olsen added.
    Capacity utilization may edge further down in the coming year but then slowly rise to a more normal level and inflation is projected to run below, but close to the bank's 2.5 percent target.
    "At its meeting, the Executive Board decided that the key policy rate should be in the interval 1%-2% in the period to the publication of the next Report on 11 December 2014, unless the Norwegian economy is exposed to new major shocks," the bank said.

    Norway's headline inflation rate eased to 2.1 percent in August from 2.2 percent in July.
   In June the bank forecast average consumer price inflation of 2.0 percent in 2014 and 2015, rising slightly to 2.25 percent in 2016 and 2017.
    Gross Domestic Product expanded by 0.9 percent in the second quarter from the first but compared with the second quarter of 2013, GDP contracted by 0.3 percent.
    In June the central bank forecast 2014 economic growth of 2.0 percent, 2015 growth of 2.25 percent, 2016 growth of 2.75 percent and 2017 growth of 3.0 percent.


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