Norges Bank Sheds Downward Bias
22 Juin 2017 - 10:39AM
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Norway's central bank unanimously decided to leave its key
interest rate unchanged on Thursday for the ninth consecutive
policy session and abandoned its downward bias for the rate
path.
The Executive Board of the Norges Bank voted to hold the key
policy rate at 0.50 percent, in line with economists' expectations.
The previous change in the rate was a quarter-point reduction in
March 2016.
"The Executive Board's current assessment of the outlook and the
balance of risks suggests that the key policy rate will remain at
today's level in the period ahead," Governor Oystein Olsen
said.
The current assessment of the outlook and the balance of risks
suggests that the key policy rate will be kept at 0.5 percent in
2017 and 2018, the bank said in the monetary policy report.
There are prospects that the key policy rate will be raised
gradually from 2019, reaching 1.25 percent towards the end of 2020,
the bank added.
Policymakers judged that there was a continued need for an
expansionary monetary policy.
Capacity utilization in the Norwegian economy is still below a
normal level, and the outlook suggests that inflation will range
between 1 percent and 2 percent in the coming years, the bank
said.
Low house price inflation would curb debt accumulation, but it
will take time for household vulnerabilities to recede, the bank
said.
Capital Economics' Jack Allen expects the key rate to remain
unchanged until 2020, later than the Norges Bank projects. This
would help to stem the upward pressure on the krone if oil prices
rise, the economist added.
In the quarterly report, the bank said inflation will slow
further in the near term and then move up a touch towards the end
of 2017.
The inflation projection has been lowered somewhat for 2017 to
1.8 percent and has been revised up a little for the following
years. Inflation is projected at somewhat above 1.5 percent at the
end of 2020.
The projection for mainland GDP growth for this year was revised
up to 2 percent from the March Report. The bank forecast 1.9
percent expansion for both 2018 and 2019.
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