By CentralBankNews.info
Norway’s central bank held its policy rate steady at 1.5 percent, as expected, and reiterated that it expects to maintain this rate until the summer of 2015 followed by a gradual increase.
Norges Bank, which last cut its rate in March 2012, said the Norwegian economy was performing broadly as projected in the December policy report though growth prospects had weakened somewhat.
However, the bank still expects growth to pick up further ahead, with capacity utilization increasing gradually towards a normal level after falling over the next year.
“At its meeting, the Executive Board decided that the key policy rate should be in the interval 1% – 2% in the period to the publication of the next report on 19 June 2014, unless the Norwegian economy is exposed to new major shocks,” the bank said.
Growth in petroleum investment and housing investment is likely to be somewhat weaker than projected, with the krone currency slightly weaker than assumed and wage growth higher than expected in 2013, the bank said.
“There are prospects that consumer price inflation will be slightly higher than previously projected,” the bank quoted its governor, Oeystein Olsen, as saying, adding that inflation was projected to be somewhat lower, but close to 2.5 percent in the years ahead.
Norway’s inflation rate eased to 2.1 percent in February from 2.3 percent in January.
In December the bank said inflation had been lower than expected and reduced its 2014 inflation forecast to 2.0 percent from a September forecast of 2.25 percent. Inflation in 2015 was forecast at 2.0 percent.
Norway’s Gross Domestic Product contracted by 0.2 percent in the fourth quarter of 2013 from the third quarter for annual expansion of only 1.1 percent, down from 2.2 percent in the third quarter.
In December Norges Bank forecast economic expansion of 2.0 percent this year, down from a previous forecast of 2.25 percent, and 2.50 percent in 2015, down from a previous forecast of 2.75 percent.
In September 2013 the central bank had forecast that rates would be maintained until the summer of 2014 but then in November it dropped this guidance. In December it then said that the policy rate should be maintained to the summer of 2015 and gradually increased thereafter.
