Norges Bank Signals Unchanged Monetary Policy for another Year

March 14, 2013

“The analyses suggest that the key policy rate be kept low longer than previously anticipated. The first increase in the key policy rate is now projected to take place in spring 2014,” says Governor Øystein Olsen.

The central bank’s policy interest rate has been at 1.5% since a 25-basis point rate cut March 2012, and the above passage contained in today’s monetary policy statement suggests at least an equal span of additional time before another change is made.  The lowness of interest rates in other countries and domestic inflation justify a policy interest rate of just 1.5% despite unemployment below 4%.  GDP is likely to expand only about 2 this year.

Norway’s policy rate was slashed during the Great Recession to 1.25% by mid-2009 from a prior peak of 5.75% before October 2008.  Officials then implemented four rate hikes totaling 100 basis points between October 2009 and May 2011 but then cut such by 50 bps in December 2011 as well as the aforementioned 25 bps in March 2012.


Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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