Central bank left lending rate low

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The executive board of Norway’s central bank left the country’s key lending rate unchanged at 1.5 percent, after their latest meeting on Thursday. Officials now don’t expect any changes in the rate for the rest of the year.

Norges Bank's headquarters, where its board decided to keep its key lending rate at 1.5 percent. PHOTO: News and Views

Jan Fredrik Qvigstad, deputy chief of the board, said there were signs that industrial activity was picking up but that economic turbulence outside Norway convinced them to leave the rate as is.

Qvigstad pointed among other things to the economic problems in Spain that have unleashed the latest wave of unease in financial markets. Interest rates have risen in some areas while stock markts have fallen but he defended the Norwegian central bank’s decision to lower the country’s key lending rate in March. He noted that if he and his fellow board members thought they’d made a mistake, they would have made a change on Thursday.

Even though Norway’s economy remains strong, he said there were three reasons for keeping rates where they are: The economic strength is tied to low interest rates, the actual rates faced by business and household borrowers are higher (between 4 and 5 percent) and price growth is well below what’s considered normal. With inflation low, the bank feels justified in keeping rates low.

“We expect that interest rates will remain unchanged throughout the year,” Qvigstad said.

Views and News staff