Key policy rate in Norway unchanged at 0.5 per cent
The Executive Board of Norges Bank (Bank of Norway) has decided to keep the key policy rate unchanged at 0.5 per cent. This is revealed in a Press release from Norges Bank. An increase in the interest rate is however imminent, which may be bad news for those who are on the limit regarding the cost of their mortgage.
On March 2, the Government put forward a revised regulation of the Monetary Policy. The inflation target is now set at 2 per cent, compared to previously being set at 2.5 per cent. The regulation will not result in significant changes in the fundamental monetary policy for Norway. The inflation target regime is flexible, and developments in output and employment are key factors. A lower numerical target in itself is of little importance for the outlook on the interest rate in the coming period.
The upturn in the economy both abroad and in Norway is continuing. Economic growth appears to be somewhat stronger than expected, and the trade surplus gap for Norway is narrowing. Underlying inflation is low, but rising capacity utilization will probably push price and wage inflation further up in the future.
The monetary policy is expansionary. The forecast for the Norwegian economy suggests that it will soon be appropriate to increase the key policy rate. The uncertainty surrounding the effects of a higher interest rate suggests a cautious approach. Overall, the changes in the outlook and the balance of risks imply a somewhat earlier interest rate increase than was forecast in the December 2017 Monetary Policy Report for Norway.
– The Executive Board’s current assessment of the outlook and balance of risks, suggests that the key policy rate will most likely be increased sometime after the summer of 2018, says CEO of Norges Bank, Øystein Olsen in a press release.
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