Norwegian central bank keeps key rate unchanged at 0.5 pct

Norway's central bank said Thursday that its executive board decided to keep the key policy rate unchanged at 0.50 percent as the country's economy is experiencing a moderate growth.

The growth prospects for imports among Norway's trading partners have weakened somewhat since June, and expected policy rates abroad have declined slightly, Norges Bank said in a statement.

Oil prices are at about the same level as before summer, while the Norwegian krone has appreciated somewhat, it said, adding that the Norwegian money market premium has increased and been higher than expected.

Inflation in Norway has been unexpectedly high in recent months. At the same time, there are signs that growth in the Norwegian economy is picking up at a slightly faster pace than projected in June, the bank said.

House price inflation has accelerated and been higher than projected. Low interest rates may contribute to a persistently high rate of increase in house prices and increase the vulnerability of the financial system. On the other hand, growth in the Norwegian economy is moderate, and capacity utilization is below a normal level, it said.

The bank's analyses suggest that the key policy rate will remain close to 0.50 percent in the next few years. At the same time, the key policy rate forecast implies a slightly higher probability of a decrease than an increase in the key policy rate in the year ahead.

"Our current assessment of the outlook suggests that the key policy rate will most likely remain at today's level in the period ahead," Oystein Olsen, governor of Norges Bank, was quoted as saying.

In Norway, the key policy rate, also called the sight deposit rate, is the interest rate on bank 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 Oct. 27. Enditem