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Norway Monetary Policy November 2020

Norway: Norges Bank holds rates at zero at November meeting

At its monetary policy meeting on 5 November, the Executive Board of Norges Bank unanimously decided to maintain the sight deposit rate at 0.00%, marking the fourth consecutive meeting of unchanged rates. The decision follows 150 basis points of easing this year, culminating in May’s move to drop rates to zero.

The hold came amid heightened uncertainty due to the ongoing pandemic, which drove the Bank’s wait-and-see approach. Nevertheless, in its communiqué the Board maintained its cautiously optimistic tone, noting that activity continued to pick up through the summer: GDP grew 4.2% in rolling quarter-on-quarter terms in August as domestic demand rebounded. However, a recent surge in daily new virus cases and the reimposition of containment measures both domestically and abroad prompted the Bank to err on the side of caution and maintain interest rates at zero.

The Bank effectively left its forward guidance unchanged, stating that its “assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at [its current] level for some time ahead”.

Regarding the outlook, analysts at Swedbank commented:

“We expect the bank to remain in wait-and-see mode until it is confident that economic conditions are indeed normalizing. It must see that a vaccine is in fact working, and the economy is on track for full reopening. In the short run, this can be hoped for, but it will not be sure. However, we think it will become clear during the first half of next year, and we therefore uphold our view that hikes will start in the second half.”

The next monetary policy meeting is scheduled for 17 December.

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