Norway: Norges Bank cuts rates to record low in March
The Executive Board of Norges Bank unanimously decided to slash the sight deposit rate to 0.25% from 1.00% at its unplanned monetary policy meeting on 19 March. The decision follows its last emergency meeting on 12 March, where it lowered the sight deposit rate from 1.50% to 1.00%. In tandem, the Ministry of Finance (MoF) lowered the countercyclical capital buffer on 13 March, from 2.50% to 1.00%, which will help loosen domestic banks’ lending standards.
The unprecedented rate cuts in March reflect worsening domestic economic conditions, lower oil prices and recent monetary easing by other major central banks due to the Covid-19 pandemic. Unemployment is expected to jump, as layoff notices increased over the past week, while stressed financial markets have raised credit premiums for households and enterprises, which puts further pressure on consumption levels. Therefore, the bank decided to cut rates to ease the burden on households and businesses, and to support a stronger rebound in activity when normal economic conditions prevail.
The Bank stands ready to cut rates further to ensure the rate cuts pass swiftly through money markets.
The next monetary policy decision is scheduled to be taken on 6 May.