Norway holds rate-confirms rate hold on for some time!
Norway holds rate:
Norway’s central bank kept its monetary policy rate steady and confirmed its view from December that “the sharp economic downturn and considerable uncertainty surrounding the outlook suggest keeping the policy rate on hold until there are clear signs that economic conditions are normalizing.”
Norges Bank (NB), which slashed its policy rate three times last year by a total of 150 basis points during March and May, left its policy rate at 0.0 percent.
Prior to the outbreak of COVID-19 early 2020, NB had been in a monetary tightening cycle, raising its rate three times and by a total of 100 basis points from September 2018 to September 2019.
In its latest quarterly monetary policy report from December, NB pulled forward a rate hike to the first half of 2022 from an earlier forecast of late 2022, forecasting the economy would continue to gradually recover from the scars of the pandemic.
Today’s statement by the bank’s monetary policy and financial stability committee says economic developments since the policy report have been broadly in line with expectations.
Economic activity slowed towards the end of 2020 and the recovery now being held back by higher infection rates and stricter containment measures.
“At the same time, vaccinations are well under way, and economic growth is expected to pick up further out in 2021,” NB said, adding underlying inflation is above its target and the rise in the krona’s exchange rate since March and prospects for low wage growth suggest inflation will ease ahead.
Norges Bank will publish its next monetary policy report and policy decision on March 18.
Norges Bank issued the following press release:
“Norges Bank’s Monetary Policy and Financial Stability Committee has unanimously decided to keep the policy rate unchanged at zero percent.
The Committee’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at today’s level for some time ahead”, says Governor Øystein Olsen.
In Monetary Policy Report 4/20, which was published on 17 December, the policy rate forecast implied a rate at the current level for over a year ahead, followed by a gradual rise.
Economic developments have so far been broadly in line with the projections in the December Report. After rising for several months, activity in the Norwegian economy fell again towards the end of 2020. House prices have risen further. The recovery is now being held back by higher infection rates and stricter containment measures. At the same time, vaccination is well under way, and economic growth is expected to pick up further out in 2021.
Underlying inflation is above the target, but the krone appreciation since March and prospects for low wage growth suggest that it will moderate ahead.
In the Committee’s assessment, the sharp economic downturn and considerable uncertainty surrounding the outlook suggest keeping the policy rate on hold until there are clear signs that economic conditions are normalising.”