Central Bank of Norway Cuts Interest Rate after Unscheduled Meeting

March 13, 2020

Norges Bank’s policy interest rate was reduced to 1.0% from 1.5%, reversing half a full-percentage point tightening implemented in 25-basis point increments in March 2018, March 2019, June 2019, and September 2019. The decision at an extraordinary unscheduled Board meetings was made unanimously. The next scheduled meeting is on March 19. A released statement justifies the move in the context of the Covid-19 pandemic and recent drop in oil prices. Norway is an oil producer and exporter.

In the near term, activity in the Norwegian economy will decline considerably owing to the coronavirus outbreak. Many firms are feeling the negative effects. Layoff notices have already been issued, and unemployment is expected to rise. Economic prospects have also weakened on the back of the sharp fall in oil prices. A lower policy rate cannot prevent the coronavirus outbreak from having a substantial impact on the Norwegian economy, but it could dampen the downturn and mitigate the risk of more persistent effects on output and employment.

The statement leaves the door open to further monetary easing if needed.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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