Norway Keeps Rates on Hold as Richest Nordic Economy Slows

(Bloomberg) --

Norway’s central bank kept its benchmark rate unchanged, and stuck to a message that monetary policy will be on hold for the foreseeable future.

“The committee’s current assessment of the outlook and the balance of risks suggests that the policy rate will most likely remain at the present level in the coming period,” Norges Bank Governor Oystein Olsen said in a statement on Thursday.

The deposit rate was left at 1.5%, as expected by all economists surveyed by Bloomberg. The krone was little changed against the euro following the decision.

The central bank of the richest Nordic economy, once dubbed the “last hawk,” has had to step away from an earlier tightening cycle as it responds to global economic uncertainty.

Norges Bank’s latest rate rise was in September, the fourth in a series of hikes that spanned a year. Back then, the bank was trying to avoid overheating amid a rebound in investments in western Europe’s biggest oil and gas producer.

Norway’s rate announcement comes as the world waits to hear from the European Central Bank later on Thursday, with President Christine Lagarde focused on a strategic review after years of negative rates, subdued inflation and economies increasingly affected by climate change and a digital revolution.

Click Here to Read About Norges Bank’s December Decision

The risk of a sharp downturn in the global economy has diminished over the past months, but uncertainties remain, Norges Bank said on Thursday. New information since the December meeting also suggests that the Norwegian economy is “probably near a cyclical peak,” it said.

DNB ASA, Norway’s biggest bank, is advising its clients that Norges Bank probably won’t raise rates through 2022. The bank also says that the oil spending boom that Norway witnessed in 2019 was probably its last.

Thursday’s announcement by Norges Bank was a so-called interim decision, with no new forecasts and no press conference. If the bank had had to publish a new outlook for the benchmark rate now, it would likely have pulled it down, said Danske Bank analyst Kristoffer Kjaer Lomholt. Yet it would probably have kept a higher chance of a hike than a cut, and any speculation on cuts going forward is “way too premature,” he added.

New Committee

The decision was also the first to be made by Norges Bank’s new Monetary Policy and Financial Stability Committee. The new body will be involved earlier in the decision-making process than the executive board was before, the bank said in a separate statement on Thursday.

“We give weight to continuity in the communication of monetary policy,” Olsen said. “At the same time, it is natural for the new committee to develop communication further over time.”

The rate decision coincides with a spell of political uncertainty in Norway. Conservative Prime Minister Erna Solberg this week lost her majority when her main ally, the populist Progress Party, left the government. While the move is likely to make governing harder, the news had little market impact.

--With assistance from Love Liman.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Stephen Treloar

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