OSLO — Norway’s central bank kept its key policy interest rate on hold at a record low zero percent on Thursday, as expected, and said the economy was broadly developing in line with expectations.
Norges Bank cut rates three times from March to May as it sought to cushion the economy from the effects of the COVID-19 pandemic, but said in June that its prospects were improving faster than expected.
“New information largely confirms the picture of the economic developments presented in the June report,” Norges Bank said in a statement.
In June, Norges Bank said its next rate move would likely be a hike towards the end of 2022.
“The committee’s assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at today’s level for some time ahead,” Governor Oeystein Olsen said on Thursday, reiterating earlier statements.
The Norwegian crown currency weakened on the news, trading at 10.59 against the euro at 0814 GMT against 10.56 prior to the 0800 GMT announcement. “Overall, we see today’s statement as fairly neutral,” Nordea Markets said. “Norges Bank will continue to monitor developments until its September meeting.”
At the moment, considerable uncertainty remains with regards to further economic recovery, Norges Bank said.
Still, Norwegian house prices have risen following the rate cuts, which in turn could contribute to financial imbalances, the central bank said.
Norges Bank is due to update its rate forecasts next month.
The Norwegian government has relaxed many of the lockdown measures it imposed in March, but is still battling local flare-ups of COVID-19 and partly restricting travel in and out of the country.
Western Europe’s largest oil and gas producer also suffered from the crash in crude prices earlier this year, which in turn hurt investments in its top export sector. (Editing by Toby Chopra)