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Norway's central bank keeps key rate unchanged at 0.50 pct

Xinhua, June 23, 2016 Adjust font size:

Norway's central bank said on Thursday its executive board has decided to keep the key policy rate unchanged at a record low of 0.50 percent because forecast is little changed since the March Monetary Policy Report.

"Growth in the world economy is moderate, and oil prices have risen further since March. Financial markets have recently been marked by the uncertainty surrounding the outcome of the UK referendum on continued EU membership," Norges Bank said in a statement.

Expected policy rates among trading partners have declined since the March Report and the Norwegian krone has been stronger than anticipated, it added.

For the Nordic country's economy, Norges Bank predicted that its growth is likely to remain weak in the coming period, even though the upswing in oil prices may reduce uncertainty and push up demand somewhat.

Should the rapid rise in house prices persist, household vulnerabilities may increase, the bank said, adding that inflation has for a period been higher than 2.5 percent, but lower wage growth and a somewhat stronger krone will weigh down on inflation ahead.

"There are still prospects that the key policy rate may be reduced in the course of the year," Oystein Olsen, governor of Norges Bank, was quoted as saying.

On March 17, the central bank said it had 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.

The bank said on May 12 it decided to keep the key policy rate unchanged at the record low of 0.50 percent because developments of the Norwegian economy were in line with projections.

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.

The Norwegian central bank's next rate decision will be announced on Sept. 22. Endit