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Sunday, June 23, 2024

Falling oil prices keep interest rates low

Norway’s central bank decided once again on Thursday to keep its key lending rate at its low level of 1.5 percent, with many analysts now predicting it’s more likely to be cut in the near future than raised. With the world economy in low gear and oil prices falling, the chance of an interest rate rise is more remote than ever, they say.

Interest rates in Norway have been pegged to to the 1.5 percent level for more than 1,000 days. Central bank officials have delayed raising rates, despite forecasts as far back as March 2012 that they’d probably boost rates a year later.

That never happened and the central bank chief himself, Øystein Olsen, said Thursday that both he and his colleagues are uncertain about what will happen now. He noted that oil prices have fallen to a level (around USD 86 a barrel as of Friday morning) that “challenges cost levels” on Norwegian oil fields in an entirely new manner.When the oil sector slows down, so does Norway’s economy.

Some analysts claimed this week that they think interest rates will slide under 1 percent. For now, the central bank is maintaining status quo, with Olsen saying that Norges Bank “will fully evaluate” the consequence of oil prices in its December report. staff



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