Norwegian Policy Interest Rate Left at 2.0%

October 27, 2010

As expected, the Norges Bank did not change monetary policy at this time.  A released statement implied that further changes are unlikely before March and that the subsequent upward path toward more normal interest rate levels will commence later than assumed in the June Policy Report because inflation since then as been lower than expected.  Core CPI inflation is likely to hover near 1.5% until next summer, as the economy grows at only a moderate pace.  Note is made of global economic uncertainties, the deferment of central bank rate increases elsewhere, and very low long-term interest rate levels in many countries. 

It was a year ago that the Norges Bank became Europe’s first central bank to raise rates, a 25-basis point increase to 1.5%.  Two similar-sized hikes followed last December and May.  During the recession, 450 basis points of key rate reduction were administered from October 2008 until June 2009, which cut the policy rate to 1.25% from a prior peak of 5.75%.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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