Norges Bank responded Thursday at an oil price drop of over 40 percent so far year to cut its key rate by 0.25 percentage points to 1.25 percent.
Thus the policy rate as low as when the financial crisis shaking still ravaged Norwegian economy in summer 2009.
And it does not necessarily there.
Governor Øystein Olsen says that it is 50 percent probability of a new rate cuts in the first half of next year, as Norges Bank sees it now.
Then in that case the Norwegian key rate come down to history lowest level .
The reason is that the oil price fall has been Norges Bank to reduce estimates for oil investments in the coming years. This means that they envisage a substantially lower growth in the Norwegian economy next year before it takes up again in 2016.
Lyspunktet Norwegian economy is that the outlook for the part of the export industry which do not export oil benefiting the krone has depreciated by more than eight percent against the euro and almost 20 percent against the dollar so far this year.
Chief Economist January Ludvig Andreassen Eika Gruppen Asked to online meeting with E24 after the interest rate decision on Thursday. Check your answers here!
– Handles drop in oil prices well
Olsen even on several occasions warned the fall in oil prices is now happening and that has consequences for the Norwegian economy because the oil sector has been so great.
– How do you handle Norwegian economy fall in oil prices so far?
– I think the response we see is roughly as one could imagine in advance. It is an adaptability in the Norwegian economy. We have a fairly flexible labor. We have a free currency that acts as a buffer and I think there is reason to emphasize that there is an adaptability also in business, says Olsen.
– The adaptability is needed in these times where to some extent to be a movement of qualified people from the oil industry to other industries. There we see in some degree, he adds.
– So we manage the transition quite well, in other words?
– I think we see.
– Far away crisis
And Olsen spent time during the press conference Thursday to emphasize that Norwegian economy is not in a crisis situation even though he cut in key interest rates and allows for the interest rate can be further reduced.
He stressed that although unemployment will rise something will most Norwegians have economic well in 2015.
– Are we far away from a crisis?
– We are far from a crisis. There is no crisis we see in all. What we see is a fairly marked slowdown of growth that over a period has been characterized by very good growth. Now it’s a necessary restructuring to lower oil prices and to the fact that the peak of activity in the oil sector is passed, he said.
– arrows pointing up out
And even though the battle against deflation in the eurozone occupy headlines reports on international economics, doen’t really worried international economy.
– There is still uncertainty, but it is light in the tunnel. Arrows pointing upward. And if it continues it will be able to take with him such traditional Norwegian export industry.
In other words mean the Governor that the reorganization of the Norwegian economy is going well. That the Norwegian economy is far from a crisis situation and the arrows pointing upwards internationally.
– Still cuts you rate and opens a new cut. Have you lost your head?
– No, definitely not. We have not. We are doing good and thorough assessments of what is required in monetary policy. It is marked weakening of the growth outlook. Monetary policy must do its job. It is time to react to it and be proactive instead of being too late, says Olsen.
For safety
interest rate cut Thursday comes as a result of the Norges Bank fear will happen than Norges Bank think is going to happen.
– There is a risk that the downturn will be even more pronounced than what we envisage now. The risk we want to guard against. It is an important job for monetary policy. Therefore, we react, says Olsen.
– So you cut interest rates “for safekeeping”?
– It may well say. There is also an insurance and hedge against a more pronounced decline in the Norwegian economy.
– Is it done with a cold or hot head?
– Both – warm heart and a cool head.
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