Norway Monetary Policy


Norway: Norges Bank stays put at June's meeting

June 19, 2014

At its 19 June monetary policy meeting, Norges Bank (NB) decided to leave the sight deposit rate unchanged at 1.50%. The Bank’s decision was on par with market expectations. The Central Bank has left the key monetary policy rate unchanged since April 2012.

In its statement, the Central Bank acknowledged a moderate upswing in growth among the country’s main trading partners, while dynamics in emerging markets slackened. The Bank also stated that global policy rates will remain low for an even longer period than previously expected. Domestically, growth has been somewhat below what was projected earlier this year. Against this backdrop, Governor Oystein Olsen stated that, “there are prospects that the key policy rate will remain at about today's level to the end of 2015, followed by a gradual rise.” That said, he adopted a more dovish tone and declared that a further weakening of Norway’s outlook may trigger a rate cut. Regarding price developments, the Central Bank said that inflation has been slightly higher than expected and that underlying inflation should continue running at between 2.0% and 2.5%.

The Central Bank also unveiled its quarterly advice on the countercyclical buffer requirement for banks. Although Norges Bank pointed out that financial imbalances are at high levels and that housing prices have picked up again, Governor Oystein Olsen affirmed that, “at present there is no basis for asserting that financial imbalances are building up further,” while, “the large savings banks will, nonetheless, likely also have to adapt to the highest capital requirements.” Norges Bank has the mandate to recommend the level of the buffer to the Ministry of Finance. The next monetary policy meeting is scheduled for 18 September.

The majority of FocusEconomics Consensus Forecast panelists expect the sight deposit rate to remain stable through the end of this year, resulting in an average forecast of 1.55%. In 2014, the panel sees the key policy rate rising to 1.93%.

Author: Ricard Torné, Head of Economic Research

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Norway Monetary Policy Chart

Norway Monetary Policy May 2014

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

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