Norwegian central bank keeps main rate unchanged at 1.25 pct

Norway's central bank said on Thursday it has decided to keep the key policy rate unchanged at 1.25 percent and concluded that the rate should lie in the interval of 0.5-1.5 percent in the period to the publication of its next report in June.

"The key policy rate was reduced in December to counter the risk of a pronounced downturn in the Norwegian economy on account of lower oil prices. So far, the effects on the real economy have been relatively small, and house prices are still rising at a fast pace. The key policy rate has therefore been left unchanged," Oystein Olsen, governor of Norges Bank, was quoted as saying in a press release.

Developments in the Norwegian economy have been broadly in line with that projected in the December 2014 Monetary Policy Report as inflation is close to 2.5 percent and unemployment has remained stable, the Norwegian central bank said.

At the same time, the outlook ahead is somewhat weaker than anticipated in December. Oil prices have continued to drift down and activity in the petroleum industry may decrease to a further extent than assumed earlier, the bank said.

Wage growth in 2014 was lower than projected and there are expectations that wages will also in the period ahead increase somewhat less than projected earlier, it added.

"If economic developments ahead are broadly in line with that projected, there are prospects for a reduction in the key policy rate," Olsen said. Endit