The bank left its key rate at 1.5 percent and said growth on the mainland – excluding the vast offshore oil and gas sector – would slip to 1.75 percent this year from last year’s 2.0 percent, before picking up to 2.5 percent in 2015.
“The analyses imply an unchanged key policy rate in the period to summer 2015, followed by a gradual increase,” Governor Oeystein Olsen said. “The path for the key policy rate remains approximately unchanged from December.”
Norway’s crown currency rose after the bank kept its rate path in place, wrongfooting some investors who had expected it to flag a loosening of monetary conditions.
Norway was western Europe’s best-performing economy until recently. It suffered unexpected turbulence late last year as consumption weakened, housing prices fell and growth in oil investment slowed. That created a policy dilemma for the bank.
A rate cut would have given the economy a much-needed boost. But household debt is already among the highest in Europe and the currency is at a four-year low, threatening higher inflation. The bank’s room to manoeuvre was limited.
And growth is expected to outpace the euro zone’s for years to come, the budget is increasing thanks to lucrative oil revenues and unemployment is barely visible at around 3 percent. All support the case for a rate hike.
Published: September 21, 2023