Interest verdict is clear – HegnarOnline

Norges Bank has decided to cut its key rate by 25 basis points to 1.00 percent.

This was in line with what almost all analysts and economists had expected.

Previous interest rate change from Norges Bank took place on 11 December 2014. Then cut the central bank also by 25 basis points (0.25 percentage points).

This says Governor
– Developments in the Norwegian economy has been slightly weaker than expected and the outlook is somewhat weaker. The policy rate is therefore set down now, says Governor Øystein Olsen.

The central bank shows that unemployment has increased, as expected, and that wage growth in 2015 is likely to be lower than assumed in March.

According to Norges Bank’s regional network, output growth has slowed, and companies expect that growth will remain sluggish in the next six months.

Further forward there are prospects that oil investment will fall less than previously estimated, turn Norges Bank fixed.

Consumer price inflation is 2.5 per cent. Krone depreciation last, according to central bank help to keep price inflation in the near term.

Forward curbed inflation by slower wage growth and that the effects of a weaker dollar gradually phased out. House prices have risen less than expected, but household debt growth remain high, argues the central bank.

– How we are now considering the outlook for the Norwegian economy, the key rate will be reduced further in the autumn, says Governor Olsen.

Background material and shapes

100 percent probability
central bank’s current interest rate scenario, from March, indicating actually 100 percent probability of a cut today.

– And in connection with the monetary policy meeting in May, they expressed that there was still the prospect of such cuts. There have been no major surprises since that would imply that the central bank should walk away from this, wrote DNB Markets in its morning report.

Norges Bank today also presented a new monetary policy report, and therefore a new interest rate path.

Will there be more interest rate cuts?
Here reigns the more disagreement among experts.

Nordea Markets believe today’s cut will be the last, while several others operate with a certain probability that the interest rate cut yet again.

Handelsbanken and said DNB Markets saw both for a lowered interest rate scenario and thus increased likelihood of another interest rate cut.

The main reason is oil brake and weaker wage growth and inflation.

– Oil brake now affecting the Norwegian economy is expected to continue into next year. In addition, wage growth has been weaker than expected, which draws future inflation expectations down, wrote the latter in its morning report today.

– Given the overall picture, we believe therefore that Norges Bank’s new interest rate path will extend slightly lower than the path from March, pulled down by a weaker current situation, but pulled up again by the prospect of next year might be better than feared, wrote Handelsbanken in its morning report.

More on the previous monetary policy meeting here.

How to determine Norges Bank’s policy rate (video link).

Here are the ones who made the decision.

Here is an overview of monetary policy meetings and changes in the policy rate.