The boss of Norway’s central bank (Norges Bank) seemed to agree on Thursday with the vast majority of Norwegian economists and analysts that it’s best to keep the country’s interest rates low and stable. The bank’s executive board announced after its lastest meeting that its “key policy rate” will remain unchanged at 0.5 percent.
“The outlook and the balance of risks for the Norwegian economy do not appear to have changed substantially since the September Report,” stated Norges Bank Governor Øystein Olsen in a press release Thursday morning. “The executive board therefore decided to keep the key policy rate unchanged at this meeting.”
The September Report had determined a “continued need for an expansionary monetary policy,” which Norway’s newly re-elected conservative government agrees with as well. Even though the Norwegian economy is recovering from the collapse three years ago of the price of the country’s major export product, oil, the bank noted that capacity utilization is still “below a normal level,” while inflation was “expected to remain below 2.5 percent in the coming years.”
The bank board’s decision on Thursday was in line with expectations. Most all analysts and economists interviewed by Norwegian media in recent days had predicted that the key policy rate would remain at the level it’s been since March of last year. Erik Bruce of Nordea Markets and Kyrre Aamdal of DNB Markets, for example, had told news bureau NTB that there was no reason to either raise or lower rates. Bruce thinks it will be a long time before interest rates are raised.
Some individual banks may actually lower their own rates, to drum up demand for mortgage lending activity that has fallen in line with housing sales and prices. Business loan activity is rising, but all the economists on newspaper Dagens Næringsliv (DN)’s interest rate panel believe there’s still a need for low interest rates.
“The upturn we’re seeing now isn’t exactly robust,” noted Steinar Holden, a professor of economics at the University of Oslo. “Housing investments are more uncertain and will probably remain at a lower level. Hiring and wage growth are also low. Low interest rates and a weak krone are important elements in the upturn we are seeing, and that’s why there’s a need for continued low rates.”