Norway’s Central Bank Policy Rate Kept at 0.75%

December 17, 2015

Officials at Norges Bank had in the past year cut the policy interest rate in December 2014, June 2015 and September 2015 by 25 basis points each time.  Today’s statement strikes a cautious note: ” The krone has depreciated and inflation has picked up. A lower key policy rate may increase the risk of a more rapid rise in real estate prices and debt. Uncertainty as to the effects of the monetary policy stance suggests a cautious approach to interest rate setting.”  That said, this energy producer is undergoing a substantial restructuring, and officials are still contemplating further ease as a possibility next year:  “If economic developments are broadly in line with projections, the key policy rate may be reduced in the first half of 2016.”  Norway was the first European central bank to raise rates after the Great Recession, doing so as early as August 2009, and the policy rate got to a high of 2.25% by May 2011.  Janet Yellen was asked yesterday about possible concerns given other central banks that have started rate normalization only to be forced by subsequent circumstances to retreat.  Norges Bank is a good example of such.

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



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