Norges Bank Doesn’t Loosen Norwegian Monetary Policy Any Further
May 10, 2012
Norway’s overnight deposit rate had been cut by 50 basis points last December and 25 basis points in March of this year, reversing three of the four 25-bp hikes implemented between October 2009 and May 2011. At 1.5% the key rate is historically low but not as much so as key interest rate levels in most other European and North American countries. Moreover, the krone is strong, and CPI inflation of 0.7% overall and 0.3% for core is far beneath the Norges Bank target of 2.5%. Accordingly, a statement posted today on the Bank’s web site implies that a 1.5% overnight deposit rate will be retained through the first quarter of next year.
The process of rate normalization has not been abandoned altogether, however. Norway’s economy is expanding between 3% and 3.5%, high by European standards, and there is some concern about the potential for distortions should rates remain extremely low too long. Prior to October 2008, the overnight deposit rate was at 5.75%.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Norges Bank
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