Norges Bank Rate Cut to 2.0% from 2.5%

March 25, 2009

Norway’s central bank as expected reduced its benchmark policy rate by 50 basis points and signaled the likelihood of more cuts in the second quarter, when the rate is expected to range between 1% and 2%.  This was the fifth reduction of the easing cycle following drops of 50 basis points on February 4, 175 bps on December 17, and 50 bps each on October 15th and 29th.  Norway becomes the fourth significant central bank to cut rates this week, along with those in Israel (25 bps), South Africa (100 bps) and Poland (25 bps).

The Norges Bank statement offers no big surprises.  Global and domestic growth outlooks are worse than previously assumed.  Although higher recently, officials have revised the expected future path of inflation downward. Monetary relief was front-loaded.  Officials are more guarded against the possibility of over-steering the economy and thus moving in smaller increments now.

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


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