Thursday, October 20, 2011

Norwegian Central Bank Holds Rate at 2.25%

Norway's central bank, Norges Bank, held its key monetary policy rate steady at 2.25%, and signaled no changes.  The Bank's Deputy Governor, Jan F. Qvigstad, said: "The Executive Board is of the view that the outlook and the balance of risks now suggest that the key policy rate should be kept at the current level for some time ahead. If the economic unrest abroad intensifies, money market premiums remain high and the outlook for growth and inflation weakens further, the key rate may be reduced. If financial market turbulence subsides and there are prospects of higher growth and inflation, the key rate may rise." 

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 (but with due upside inflation risks); 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 gained about 4% against the US dollar this year, while the USDNOK exchange rate last traded around 5.64


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