By www.CentralBankNews.info Norway’s central bank kept its policy rate steady at 1.5 percent, saying economic growth and inflation had been slightly lower than projected so it first expects to raise rates in the Spring of 2014.
Norges Bank started easing its upward rate bias last October when it delayed a planned rate increase until this year from end-2012. At its previous meeting in January, the bank maintained a slight upward bias but it has now delayed any rate change until next year.
“The analysis suggests that the key policy rate be kept lower longer than previously anticipated,” the bank quoted its governor Oeystein Olsen as saying.
“The first increase in the key policy rate is now projected to take place in spring 2014,” he added. Norway’s central bank cut rates twice in 2012 for a total cut of 49 basis points.
While growth and inflation remain low, the central bank said household debt and house prices were still rising faster than income.
The central bank said it would introduce a countercyclical capital buffer to give banks more capital to draw on in an economic downturn. The size would be determined later this year.
Norway’s inflation rate fell to 1.0 percent in February from 1.3 percent in January and the central bank said its policy rate was low because inflation is low and because interest rates abroad are low.
The central bank targets inflation of 2.5 percent.
The bank added that growth prospects for trading partners had weakened though global growth remains robust. Capacity utilization in the Norwegian economy is above normal and unemployment is low.
“At the same time, there are now prospects that it will take longer for inflation to move up to the inflation target,” the central bank said.
Norway’s Gross Domestic Product rose 0.4 percent in the fourth quarter from the third quarter for an annual rate of 2.1 percent.