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Norway's key policy rate unchanged at 0.50 pct

Xinhua, December 15, 2016 Adjust font size:

Norway's central bank said Thursday its executive board has decided in its latest meeting to keep the key policy rate unchanged at 0.50 percent and the rate will probably remain close to that level in the coming years.

"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 a statement.

Oil prices have risen and are now somewhat higher than expected, while the Norwegian krone has appreciated more than anticipated, according to the statement.

There are prospects that inflation will be lower than projected and that activity in the Norwegian economy is picking up at a somewhat slower pace than projected in September, it added.

The bank explained that changes in the outlook for inflation and capacity utilization imply, in isolation, a somewhat lower key policy rate in the coming years. On the other hand, the rapid rise in house prices and household debt has increased the risk of a sharp fall in demand further out.

A lower key policy rate increases the risk of a further acceleration in house price inflation and debt accumulation. The risk of a build-up of financial imbalances and the uncertainty surrounding the effects of a lower key policy rate now suggest a cautious approach to interest rate setting, it said.

The bank said its analyses suggest that the key policy rate will remain close to 0.50 percent in the coming 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.

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 March 16. Endit