Norway's central bank keeps key 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 there are still prospects that the rate will be lowered in June.

"Developments in the Norwegian economy have so far been broadly in line with the March projections. On the basis of an overall assessment, the Executive Board decided to keep the key policy rate unchanged at this meeting," Oystein Olsen, governor of Norges Bank, was quoted as saying in a press release.

Economic growth among Norway's trading partners is still moderate. Inflation is very low in many countries. Policy rates are close to zero or negative, and expectations concerning policy rates abroad for the period ahead have fallen somewhat, the Norwegian central bank said.

Consumer price inflation in Norway is close to 2.5 percent. Unemployment has risen as expected. This year's wage settlement suggests so far that wage growth may be somewhat lower than previously projected, the bank said.

On the other hand, oil prices have increased and household demand remains buoyant. House prices continue to rise and household debt has increased more than expected, it added.

"From the information we have received recently, there are still prospects that the key policy rate will be lowered in June," Olsen said.

In Norway, the key policy rate, also called the sight deposit rate, is the interest rate on banks' deposits up to a quota in Norges Bank. Changes in Norges Bank's key policy rate will normally have a strong impact on short-term money market rates and on banks' deposit and lending rates. Endit