OSLO: Norway’s central bank left its key interest rate unchanged on Thursday, in line with forecasts, but repeated it may cut later this year to fight an economic downturn triggered by low oil prices.
The future rate path was raised slightly, however the bank also repeated it could potentially reduce the cost of borrowing to negative levels.
“Should the Norwegian economy be exposed to new major shocks, the Executive Board will not exclude the possibility that the key policy rate may turn negative,” Norges Bank governor Oeystein Olsen said in a statement.
All but one of the 14 economists polled by Reuters had said the bank would keep its deposit rate unchanged at the current record low 0.50 per cent. All the economists expected rates to be cut to 0.25 per cent in September.
“The probability of a September rate cut is still at 100 per cent, unless anything very unusual were to happen. The future rate path now bottoms out at 0.25 per cent however, slightly higher than before, removing the prospect of an additional cut,” Nordea Markets economist Erik Bruce said on Thursday.
Other sectors
A 55-percent fall in crude prices since mid-2014 has led to a slowdown in activity in the country’s top industry, oil production.
However, fears the downturn would spread to the rest of the economy have been dampened as other sectors have performed well due to boosted government spending and a sharp drop in the value of the crown against the euro over the past two years.
The crown strengthened slightly against the euro after the bank’s decision.
