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Norges Bank Governor Says Record Weak Krone No Cause for Concern

Norges Bank Governor Says Record Weak Krone No Cause for Concern

(Bloomberg) -- The governor of Norges Bank, Oystein Olsen, says the krone has weakened more than was expected just a month ago, but that the move so far doesn’t warrant concern.

In an interview on Friday, Olsen said the extent of the depreciation to date isn’t “dramatic,” and that the Norwegian economy hasn’t been hurt by the decline. He also shed some light on how the bank will incorporate the currency into its assessments going forward, amid speculation the krone’s historic weakness might prompt forecasting changes.

“The significance of the movement in relation to the next interest rate assessments will be the same, even though the exchange rate equilibrium has been adjusted,” he said on Friday.

Last month, Olsen pushed through a fourth rate hike in a year, as a giant wealth fund built on oil riches and multiple waves of fiscal stimulus free Norges Bank to break away from the pack. But higher Norwegian rates haven’t prompted investors to buy kroner, and the currency has continued to slide to its weakest level on record against the euro.

Meanwhile, the exchange-rate development has boosted the value of foreign assets held by the wealth fund, when measured in kroner. On Friday, the fund said it passed the 10 trillion-krone ($1.1 trillion) mark for the first time.

Olsen says a weaker currency will aid competitiveness, but can also lead to higher inflation.

To contact the reporter on this story: Sveinung Sleire in Oslo at ssleire1@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Tasneem Hanfi Brögger, Kati Pohjanpalo

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