Norwegian Executive Monetary Policy Board Keeps a 2.25% Policy Rate

September 21, 2011

The last full review by policymakers in June projected a range of 2.25% – 3.25% in its key interest rate through the subsequent big review on October 19.  The rate was at 2.25% at the time of that prediction, that is at the floor of the indicated range.  Subsequent policy meetings on August 10 and today left the rate at 2.25%, so it will remain “low” for the entire June-October period.  A statement today speaks of turbulent financial markets, paused monetary policy at many other central banks, and somewhat weaker-than-expected demand and production in Norway, concluding that

“Our analysis in June implied a gradual increase in the key policy rate through the final half of the year. The turbulence and uncertainty abroad, combined with lower inflation and weaker prospects at home, suggest that the key policy rate should be kept low for a longer period than expected in June.”

In the Great Recession, the key rate of the Norges Bank had been reduced seven times from 5.75% prior to October 2008 to 1.25% after the final move in June 2009.  Rate hikes of 25 basis points each, a gradual normalization even though inflation remained satisfactory, were implemented in October 2009, December 2009, May 2010 and May 2011.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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