Norges Bank Keeps Interest Rate at a Record Low of Zero Percent – E24

The case is being updated

It comes after the central bank’s interest rate meeting on Thursday morning.

– The strong economic recession and the great uncertainty about future developments indicate that interest rates will remain calm until we see clear signs that conditions in the economy are normalizing, Governor Øystein Olsen says in a statement.

Although economic activity has recovered over the summer in line with lower unemployment, an increase in the spread of the virus could slow the economic recovery in the future, the central bank believes.

He emphasizes that “it will take time” before the economy recovers to pre-crisis levels.

Small adjustments in the interest rate trajectory

In addition to the interest rate decision, Norges Bank will also present a recent monetary policy report. Includes interest rate outlooks and forecasts for the Norwegian economy.

Here, the forecast for the interest rate trajectory has changed little from the previous monetary policy report, and the central bank is still signaling an increase in interest rates in the second half of 2022.

At the same time, Norges Bank is making a significant upward adjustment to expectations for house price growth.

This year, the central bank expects house price growth of 3.7%. By comparison, the previous estimate was 2.7%. Furthermore, in 2021, Norges Bank expects growth of 5.2%. The previous estimate was four percent.

Although the krona exchange rate has weakened recently, the krona has been stronger than Norges Bank had previously estimated. Looking ahead, the central bank expects the krona to strengthen a bit and sees a stronger krona exchange rate than in the previous report.

“The probability that a vaccine will be widely available next year appears to be somewhat higher than before the summer. It is also the basis for the estimates in this report, “writes Norges Bank.

Low interest rate registry

During the crown crisis, the central bank cut interest rates by a total of 1.50 percentage points to zero percent for the first time in history.

While there was a broad expectation beforehand that the interest rate would remain unchanged, there was more tension associated with the interest rate trajectory, that is, what Norges Bank considers to be the most likely development in the interest rate. key policy going forward.

At the previous interest rate meeting in June, the central bank noted that interest rates would remain unchanged for a long time. At the same time, many were surprised that the trajectory of interest rates heralded several increases in interest rates beginning in late 2022.

It was especially the strong housing market that was behind the upward adjustment of the interest rate outlook. However, house price inflation has slowed somewhat this fall and the government has recently tightened the crown’s exceptions to mortgage rules.

The outlook for the Norwegian economy

Norway, like most other countries, is now in recession (economic recession) after two quarters of decline in GDP growth. In the second quarter, there was a historically high decline in the continental economy of 6.3 percent.

Despite the fact that the economy has recovered somewhat after three months of growth, the level of activity in July is still 4.7% lower than before the February crisis.

In the Norges Bank forecast for June, the estimate was for a 3.5% fall in continental GDP in 2020.

Statistics Norway improved its forecasts earlier this month and now expects a 3.2% drop this year and a rise in interest rates next year.