Wednesday, August 29, 2012

Norway keeps rate on hold, says economy faring well

     The central bank of Norway kept its key policy rate unchanged at 1.5 percent, as widely expected, saying the country's economy was doing well but inflation was on the low side.
    "The Norwegian economy is still faring well, but inflation is low. External growth is sluggish and interest rates abroad are very low. Against this background, the key policy rate is kept unchanged at 1.5 per cent," Norges Bank said in a statement, quoting Deputy Governor Jan F. Qvigstad.
    Norway's GDP expanded by 1.0 percent in the second quarter from the first, for an annual growth rate of  5 percent, up from 4.6 percent in the first quarter.
    Inflation rose by a mere 0.2 percent in July from July 2011, down from an annual rate of 0.5 percent in June. Norges Bank targets annual inflation of 2.5 percent.
    The central bank last cut its policy rate by 25 basis points in March. In August 2011 the rate was 2.25 percent.
    Norges Bank said developments in Norway and among its trading partners was broadly in line with expectations though inflation was slightly lower than forecast and the krone had recently apprecated somewhat.
    "In June, the key policy rate was projected to remain at today's level in the period to the turn of the year. New information does not warrant a change to this assessment," Qvigstad said.
    The bank said the U.S. economy was continuing to expand at a moderate pace but growth was slowing in several emerging Asian economies and economic activity was declining in both the euro area and the U.K.
    "Central bank key rates are close to zero in many countries and there are prospects that they will remain low longer than previously anticipated. In the US, the Federal Reserve has reaffirmed that it will keep interest rates near zero until end-2014, and in the euro area market prices indicate that the short-term money market rate (EONIA) will be close to zero until end-2013," the bank said.


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