The executive board of Norway’s central bank (Norges Bank) has acted in line with economists’ recommendations this time, announcing Thursday that there would be no increase in its policy rate. It remains unchanged at 1.5 percent.
Norwegian economists making up an interest rate panel for the country’s major business newspaper, Dagens Næringsliv (DN), were surprised last month when the board boosted the central bank’s key rate by a quarter-point. They were unsure whether it was necessary, and in recent weeks Norway’s krone has become even weaker than it already was.
On Thursday it weakened again on the mid-morning interest rate announcement in Oslo. It took NOK 9.12 to buy one US dollar, compared to NOK 9.09 just before the announcement.
The board explained its decision by noting that new information since last month’s interest rate boost “indicates that the policy rate outlook for the coming period is little changed.” It noted that “the upturn in the Norwegian economy is continuing broadly in line with expectations in September.” Inflation is as expected.
“Global uncertainty persists and interest rates abroad are very low,” the bank wrote in its announcement. “At the same time, the weak krone may result in higher inflation ahead.”
Meanwhile the central bank’s overnight lending rate is set at 2.5 percent and its reserve rate at 0.05 percent. Norges Bank Governor Øystein Olsen stated that the board’s “current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at the present level in the coming period.”
While “the coming period” is rarely specified, DN‘s economist panel believes the central bank has already boosted rates for the last time this year. All five of its economists who include three professors, a professional economic researcher and the chief economist of a commercial bank were likely to be satisfied this time with the board’s decision. They had unanimously agreed earlier this week that no change in interest rates was warranted, since there had been no “special and unexpected situations” since last month.
The next interest rate assessment is due just before the Christmas holidays begin.