Norges Bank forecasts a record low interest rate at least two years – Aftenbladet.no

The decision to keep the key rate unchanged at 1.25 percent was contrary to the expectations of the market.

When the dust had settled, spread his reactions from statements like “a huge mistake” and “proper shocking “to” wise “and” euphoria “.

– We are aware that we would surprise some commentators, and also the market, noted Governor Øystein Olsen at a press conference after the decision was announced.

Weaker prospects

After the interest rate cut of 0.25 percent in December last year, the Norwegian economy evolved largely as expected, argues Executive Board of Norges Bank.

– We see that rate cuts work, stated Olsen during Thursday’s press conference.

Meanwhile, house prices have risen more than previously estimated. Not to provide additional nutrition to the development, concluded Norges Bank this time contrary to expectations.

However, it looks as a clean cut before the summer. Prospects for the Norwegian economy weakened, says the central bank analysts. This suggests that the key policy rate ahead will be lower – longer.

– The prognosis policy rate is lower than what we presented in December. The analysis today implies a key rate of about 1 percent over the next two years, says Olsen.

discourages speculation

With such a low interest rate can Olsen reason to warn young people – and other – which is moving into the property market:

– Buy property to stay. Do not regard it as an investment that you will make money. For the prices do not always come to rise. It’s going to change and turning, says Olsen.

Although the current outlook to a base rate of 1′s until 2018, should not be tempted to housing speculation, believes the governor.

– When purchases should have a horizon that is far beyond two years. Besides, the view on top of this. An interest rate forecast is no promise from our side, clarifies Olsen.

Lower wage growth

Norges Bank states that pay increases were lower than what it even tipped in December. In addition there are expectations of a lower wage to come.

The bank also adjusts down its estimate of expected investments in the oil and gas sector, in addition to the price of oil.

On top of this several central banks around us introduced negative interest rates, and the prospect of interest rate hike in other countries are once again pushed forward in time.

Until now, unemployment has not risen by as much as Norges Bank envisioned in December – which can partly be explained by the weakened labor. (© NTB)

(© NTB)