Board of Norges Bank on Thursday decided to lower the interest rate to 1.25 percent. It is the first time in well over two years – or 1001 days to be exact – that interest rates change. Last time the interest rate was changed was 14 March 2012.
– Oil prices have fallen sharply and the prospects for growth in the Norwegian economy is weakened. Therefore, the interest rate down, says Governor Øystein Olsen in a statement.
The central bank predicts growth in mainland GDP next year at 1.5 percent, a downward revision of 0.75 percentage points.
In the wake of the interest rate cut falls crown as a stone. A euro now costs over 9 million. A dollar to be paid with 7.27 million.
Swedish krone now approaching 1 to 1 against Norwegian kroner, half an hour after the interest rate cut must be 96 Norwegian ear on the table for a Swedish crown.
Excellent
Today’s rate change comes surprising. According to a survey conducted by TDN Finans thought 13 of 14 economists questioned asked that interest rates remain unchanged.
Almost all still think that the board of Norges Bank have agreed to be clear that the interest rate can be cut faster than it has been opened up to now.
With blueprint in hand it can be concluded that the experts were right in their assumptions about the interest rate path – Norges Bank lowers it, and now assume that there is a 50 percent chance of a new rate cut at the next monetary policy meeting.
E24s interest rate council four prominent economists were more divided than TDNS experts here thought half that rate will be cut already at today’s meeting.
Both Due-Andresen and her economist colleague in oak, chief economist January Ludvig Andreassen, so that the interest rate will be cut by 0.25 percentage points.
When the interest rate cut reacts chief economist Harald Magnus Andreassen Swedbank with pleasure.
– I thought that they should have cut, but I thought they were going to wait until March. That they cut now is absolutely excellent, says chief economist at Swedbank to E24.
At DNB and Nordea is the contrast more skeptical current interest rate cuts.
– We were open that this could happen, but we do not think is right, says chief economist Øystein Dørum DNB Markets.
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Will be worse
Norges Bank press release stated that the state of the Norwegian economy will worsen. We have not yet seen the effect of the sharp drop in oil prices through the fall.
“At home, the growth outlook weakened. Activity in the petroleum industry declines, and the sharp fall in oil prices will probably reinforce this trend. It will have repercussions for the rest of the economy and unemployment may rise somewhat ahead, “writes Norges Bank.
The bank also points out that the crown has weakened, which contributes to increasing inflation because much of what we consume is imported. Norges Bank’s mandate is to keep inflation at around 2.5 percent.
“With inflation close to 2.5 per cent implies consideration of stability in output and employment a lower interest rate “writes Norges Bank.
Unemployment will rise
The backdrop for today’s monetary policy meeting is autumn dramatic fall in oil prices, which is about to propagate into the Norwegian economy.
Since Midsummer’s Eve, oil prices have fallen by $ 50 a barrel. Thursday sold a barrel Brent oil for scarce 65 million.
At 12:00 pm have E24 online meeting with chief economist Jan Andreassen oak. You may send him questions about interest rates – and other economic wonderings you have.
Oil companies are tightening their belts in which propagates into their subcontractors. It beats in the next round into the activity of other local businesses, and in the next round of state revenue, municipal finances and maybe housing prices.
The last few weeks we have seen that one expert after another turns down their projections for economic activity next year. In NHO’s faith in the future lower than it was during the financial crisis, and at SSB they foresee that unemployment will rise, prices fall and that economic growth will only be 1 percent on the mainland.
– We can not say that we should return to normal, for we shall not, said Finance Minister Siv Jensen in an interview with E24 Wednesday afternoon.
Holds the bank claims
Norges Bank will not increase banks’ capital requirements, and recommends that countercyclical capital buffer is maintained at 1 per cent from 30 June 2015.
The countercyclical capital requirement is an additional insurance against the major Norwegian banks should go over end as a result of a new financial crisis. Norges Bank each quarter an advice to the Ministry, which puts the final requirement of the bank’s equity.
An increase in bank capital requirements may make it more expensive to be a customer of large Norwegian banks.
“The banks have been profitable so far this year and is on track to meet the new capital requirements,” writes Norges Bank.
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