Norway Monetary Policy


Norway: Norges Bank decides to leave sight deposit rate unchanged at May's meeting

March 19, 2015

At its 7 May monetary policy meeting, Norges Bank (NB) decided to keep the sight deposit rate unchanged at 1.25%, surprising analysts a second time as they had expected the Bank to reduce the rate at both the March and May monetary policy meetings. The Bank last cut rates at is December 2014 meeting, reducing the rate from 1.50% to the current rate of 1.25%.

In its statement, the Central Bank recognized that growth amongst Norway’s trading partners was slightly weaker than projected at its March meeting, but that the outlook has not changed significantly. Policy rates and inflation remain low or negative across Norway’s main trading partners, and expectations regarding policy rates have been revised downward marginally. On the other hand, oil prices have risen more than expected and the value of the kroner is in line with March’s expectations.

On the home front, growth in the Norwegian economy largely proceeded as predicted in March. Household consumption as well as household debt have increased, house prices continue to climb, and wage growth has been somewhat lower than expected, putting downward pressure on prices. The Bank noted that “(f)urther developments in house prices and debt are still subject to uncertainty. At the same time, the risk of a pronounced downturn in the Norwegian economy appears to have diminished somewhat.”

Although new economic data has largely been in line with expectations, Governor Olsen has not dismissed the possibility of further rate cuts in in Q2, stating that "(f)rom the information we have received recently, there are still prospects that the key policy rate will be lowered in June." The next policy meeting is scheduled for 18 June.

FocusEconomics Consensus Forecast panelists expect the sight deposit rate to be at 0.94% at the end of 2015. In 2016, the panel sees the key policy rate rising to 1.00%.

Author:, Economist

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Norway Monetary Policy Chart

Norway Monetary Policy May 2015 1

Note: Sight deposit rate in %.
Source: Norges Bank (NB).

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