The board of Norway’s central bank, Norges Bank, opted to keep the country’s key lending rate at its current level, 1.75 percent, on Wednesday. The lack of any new increase was in line with the expectations, and desires, of several Norwegian economists and analysts.
The central bank last raised rates in December and it’s generally believed interest rates will rise some more, but later in the year. The December hike was the latest in a series of quarter-point increases last year, aimed at keeping inflation under control.
Now, however, there were fears that another interest rate hike would further strengthen the already-strong Norwegian currency, the krone, and that in turn could hurt Norway’s export industry.
“We chose to keep interest rates unchanged at this meeting,” said Jan F Qvigstad of Norges Bank. “Inflation and economic activity can, for a while, be lower than we expected.”
He said that analyses used by the central bank suggest that the key rate, known as styringsrente, should gradually be increased, “but growth isn’t high and in some branches, there’s still a decline.”
A poll of economists conducted by news service TDN Finans this week had resulted in 12 out of 13 predicting no change in interest rates. They pointed out that economic development in Norway has been weaker than expected of late, despite low interest rates and an expansive government policy. An interest rate hike, they feared, could have further slowed things down.
Economic optimists abound in Norway, however, and many feel another surge of economic growth looms as the global economy tries to emerge from the finance crisis. Central bank officials earlier have said interest rates should remain between 1.5 and 2.5 percent until late June.
Mortgage rates in Norway generally run two points above the key lending rate, and currently are mostly under 4 percent.