Norway's Turn

February 3, 2009

The Reserve Bank of Australia cut its cash rate today, and the Bank of England will no doubt do so on Thursday. But first, policymakers at the Norges Bank meet and are widely expected to cut their key deposit rate at 13:00 GMT on Wednesday.  The rate is presently at 3.0% after cuts of 50 basis points each on October 15th and 29th followed by a much greater-than-forecast 175 bps on December 17th.  Materials released after the most recent rate reduction retained a downwardly biased risk for the benchmark rate, projecting that it would lie between 2% and 3% during the period until the next monetary policy report in late March.  Street expectations are centered upon a 50-basis point further reduction this week.  Although December Norwegian retail sales exceeded forecasts, other data have been weak, the global economic outlook is worse now than in mid-December, and the present 3.0% rate level looks comparatively high after steep cuts by other central banks. A greater-than-50 basis point reduction seems possible, if not plausible.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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