By Central Bank News
Norway’s central bank kept its policy rate unchanged at 1.5 percent, as widely expected, and delayed an increase in the rate to sometime next year.
Norges Bank, which has cut rates twice this year, said in a statement that it was keeping its rate on hold due to low inflation and low interest rates worldwide.
“Developments in the Norwegian economy give reason to believe that inflation will gradually pick up,” the bank said in a statement, quoting Governor Oeystein Olsen.
“The analysis in this report suggests that the key policy rate should be kept at today’s level into next year, followed by a gradual increase towards a more normal level. The forecast for the key policy rate in 2013 is slightly lower than in the June forecast,” he added.
In its June Monetary Policy Report, the bank had forecast an increase in the policy rate by the end of this year. But at its last meeting in August, the bank said it was starting to postpone the rate rise, saying the upward shift in interest rates had been deferred, though it did not specify until when.
Norges Bank said growth among its trading partners was weak and uncertainty was elevated, but easier policy by several central banks had helped tensions in financial markets to ease.
Norway’s economy was growing solidly and capacity utilisation higher than normal, the bank said, adding the krone currency had appreciated
“At the meeting, the Executive Board decided that the key policy rate should be in the interval 1% – 2% until the publication of the next Report on 14 March 2013, unless the Norwegian economy is exposed to new major shocks,” the bank added.
Norway’s economy expanded by 1.0 percent in the second quarter from the first, for a 5 percent annual growth rate, up from 4.6 percent in the first quarter.
The inflation rate was steady at 0.5 percent in September, below the central bank’s 2.5 percent target.
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