Tag Archives: Central Bank

Norway Is Seen Leading the Way in Post-Covid Interest Rate Hikes

Norway’s central bank said it may be able to raise interest rates earlier than previously thought, reinforcing the view it will be the first among holders of the world’s major currencies to tighten policy as the economy recovers.

Keeping the benchmark rate at 0% as expected, policy makers said Thursday that their latest forecast implies a “gradual rise from the first half of 2022 as activity approaches a normal level” after the pandemic. The krone gained as much as 0.8% against the euro.

The outlook stands out among the world’s key central banks from the U.S. to Japan, which are all expected to maintain ultra-loose policies for years to support their pandemic-stricken economies.

Norway, by contrast, has relied more heavily on fiscal measures to weather the crisis better than most. This year, it withdrew record amounts from its $1.2 trillion sovereign wealth fund, the world’s biggest, easing pressure on the central bank.

Kristoffer Kjaer Lomholt, a chief analyst at Danske Bank who had expected policy makers to raise rates by December 2021, said his call “seems even more likely now” after Thursday’s announcement.

What Bloomberg Economics Says…

“Abundant fiscal support to households and businesses will help Norway bounce back from the Covid-19 recession. We expect the central bank, which also takes financial stability into account, will be able to raise rates already in the first quarter of 2022 — sooner than flagged today.”

— Johanna Jeansson, Nordic economist

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Only 4% of Norway uses cash as country evaluates CBDC, Norges Bank exec says

Cash usage has declined in Norway since COVID-19, but physical currency also carries strengths that CBDCs may lack.

Speaking at an event on Thursday, Ida Wolden Bache, deputy governor at Norway’s central bank, described a decline in cash payments while elaborating on Central Bank Digital Currencies, or CBDCs. 

“Only 4% of payments are now made using cash,” Bache said in her speech during Finance Norway’s Payments conference. “This share is approximately the same as in spring, and considerably lower than before the pandemic,” she added. “To our knowledge, the share of cash payments is lower in Norway than in any other country.”

Norway uses the kroner, the currency issued by Norges Bank, the country’s central bank. After COVID-19 concerns arose in March, common points of personal contact logically became worrisome for countries. Those included physical currencies, which change hands constantly. 

CBDCs have also arisen as a hot topic in 2020. A large number of the world’s nations to put out such a digital asset, with China boasting of testing its asset. 

“A trend specific to Norway and some of our neighboring countries is the low and falling level of cash use,” Bache said after detailing various aspects of the global CBDC scene. 

The central bank monetary policy director mentioned salient qualities available in cash. Cash remains available if digital payment systems go down for example. “Cash is legal tender that is widely accessible,” she said. The country might lose some of these aspects if it goes fully digital with a CBDC.

Bache pondered: 

“The question is whether something important will be lost if cash dies out and we do not introduce CBDC? Is central bank money crucial to confidence in the monetary system? Could CBDC provide more than cash can offer, in the form of a greater range of uses and more innovation?”

Bache also touched on an array of other points of consideration when it comes to Norway launching a CBDC. “The prospective introduction of a CBDC is still some way off,” she said, adding:

“The lack of urgency reflects our view so far that there is no acute need to introduce a CBDC. The introduction of a CBDC could have considerable consequences in a number of areas. Our decision must be well-informed.”

As far as progress goes, Norway’s central bank continues studying CBDCs. Brazil’s economy minister confirmed the country’s pursuit of a CBDC yesterday. 

Reuters: Norway central bank survey sees stronger growth

OSLO, June 11 (Reuters) – Norwegian companies in the last three months increased their output at the fastest pace since 2012 and production is set for further strong growth in the time ahead, a central bank business survey showed on Tuesday.

“Enterprises expect output growth to remain firm ahead and are planning for solid investment growth,” Norges Bank said.

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