Bank of Norway Cuts Deposit Rate to Record Low of 1.0%

June 18, 2015

Norway is an oil producer, and its economy was hard hit by the plunge in world oil prices after mid-2014 even though that dive has lately leveled off.  A statement from Norges Bank Governor Olsen says that Norwegian growth has lately been weaker than expected.  This not only justified today’s cut of 25 basis points but led officials to warn in statement that “the key policy rate may be reduced further in the course of autumn.”  This guidance should be taken seriously.  After the prior policy meeting on May 7, for example, officials had suggested that a cut at today’s June meeting was possible.  Indeed, there have now been four reductions over the past 3-1/2 years: a first one of 50 basis points in December 2011 followed by three 25-bp cuts in March 2012, December 2014, and now.  At 1.0%, the deposit rate is now even below its Great Recession floor of 1-1/4%.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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