Norwegian Policy Rate Cut to 2.5% from 3.0%

February 4, 2009

A 50-basis point rate reduction by the Norges Bank today matched consensus market expectations.  This was the fourth cut since mid-October, totaling 325 basis points from a prior peak of 5.75%.  A statement released by the central bank suggests that policy has entered a wait-and-see period during which the impact of policy stimulus will be assessed but that the key policy rate is likely to be cut to a floor rate of 2% around 4Q09.  The standard caveat of great uncertainty surrounding the economy’s future is included, nevertheless, reminding investors that future policy is not locked in stone but rather an organic process dependent on evolving trends.  Core inflation has fallen to 2.75% and is likely to flatten around 2.5%.  The international recession has been deeper than expected.

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


Comments are closed.