Norway's central bank cuts key rate to record low of 0.75 pct

Norway's central bank said on Thursday it has decided to lower the key policy rate by 0.25 percentage point to a record low of 0.75 percent because of weakened growth prospects.

"Growth prospects for the Norwegian economy have weakened and inflation is projected to abate further out. The Board has therefore decided to lower the key policy rate now," Oystein Olsen, governor of Norges Bank, was quoted as saying in a press release.

Growth in the Norwegian economy is likely to remain low for a longer period than projected earlier owing to the fall in oil prices through summer, Norges Bank said, adding that unemployment is projected to continue to edge up.

Oil investment is expected to fall to a further extent than projected in June and lower demand for goods and services from the petroleum sector will reduce activity in other parts of the economy, it said.

On the other hand, a weaker krone will contribute to strengthening the profitability of export and import-competing firms, the bank said.

The krone depreciation has pushed up consumer price inflation. Low wage growth is keeping down cost growth, and inflation will edge down as the effects of the krone depreciation unwind, it said.

"The current outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the coming year," 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. Endite