Norway's central bank cuts key rate to record low of 0.50 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 0.50 percent because of weakened growth prospects for the Norwegian and global economy.

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

It appears that global growth will be somewhat lower than expected and interest rates abroad have fallen, the bank said, adding that developments in the Norwegian economy have been weaker than foreseen and unemployment is expected to edge up.

The Norwegian krone's depreciation has pushed up consumer price inflation and there are prospects that wage growth will be lower in 2016 than in 2015, the bank said.

As the effects of the krone depreciation unwind, inflation will drift down, it added.

The Norwegian central bank warned that should the country's economy be exposed to new major shocks, the banks's executive board will not exclude the possibility that the key policy rate may turn negative.

"The current outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the course of the year," Olsen said. Endit