Norway Monetary Policy Likely to Tighten before 2013

June 20, 2012

The Executive Board left its key policy rate at 1.5%, the same decision of no change that was made at the prior meeting on May 10.  Earlier, the Norges Bank’s rate had been cut by 50 basis points last December and a further 25 bps in March.  A statement observes that Norway’s economy has expanded a little faster so far in 2012 than anticipated but balances that development with a downgraded forecast of growth in Norway’s export markets.  Where guidance is provided regarding future policy, the statement opines that

The analyses in this Monetary Policy Report imply a key policy rate at about today’s level towards the end of 2012. Thereafter, the key policy rate is projected to rise gradually towards a more normal level. However, there is considerable uncertainty surrounding economic developments ahead.

In the Great Recession, Norges Bank implemented seven cuts totaling 450 basis points from a peak of 5.75%.  Then four increases were subsequently administered from October 2009 through May 2011, each of which was by 25 basis points.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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