Norway’s central bank decided on Thursday, as expected, to keep its key lending rate unchanged at 1.5 percent. The bank’s executive board saw no reason to raise or lower it, and suggested that any increase may come even later than earlier predicted.
“The moderate economic upswing among Norway’s trading partners is continuing,” wrote the central bank board in its announcement from its last meeting before the summer recess. “There are nevertheless prospects that policy rates abroad will be raised at an even later point in time, primarily reflecting weaker inflation expectations for Europe.”
Economic growth in Norway, meanwhile, has also been moderate, “broadly in line” with the level projected by the bank’s own monetary policy report in March. Growth may, however, “prove to be somewhat lower than projected earlier in the period ahead.”
Øystein Olsen, governor of Norges Bank, said the bank’s analyses “imply that the key policy rate be held lower longer than previously projected,” echoing remarks made by several analysts interviewed on Norwegian Broadcasting (NRK) earlier in the day.
“There are prospects that the key policy rate will remain at about today’s level to the end of 2015, followed by a gradual rise,” Olsen said. “A further weakening of the outlook for the Norwegian economy may warrant a reduction in the key policy rate.”
Norway’s inflation rate remains near the 2.5 percent rate used by the central bank when determining interest rate levels. The bank noted on Wednesday that inflation is now projected “to be somewhat below, but close to, 2.5 percent in the years ahead.”
The bank board won’t meet again until September 18 and decided to keep its “key policy rate” in the interval 1-2 percent, “unless the Norwegian economy is exposed to new major shocks.” Low interest rates have also tamed Norway’s strong currency somewhat. The strength of the Norwegian krone has caused problems for Norwegian exporters because it makes Norwegian products even more expensive abroad than they normally can be.