The Monetary Policy and Financial Stability Committee of Norges Bank decided at its meeting on May 2 to keep the main interest rate unchanged at 4,5%, we read in a press release from Norges Bank.
– Based on our current assessment of the outlook, the interest rate is likely to remain at its current level for quite some time, says Central Bank President Ida Wolden Bache.
Main interest rate at 4,5 percent for a longer period of time
The commission estimates that the rate procent is high enough to bring the price dynamics down to the target of 2% within a reasonable time. Monetary policy appears to be tightening and the Norwegian economy is showing low growth. Price growth is slowing but still well above target. Business costs have increased significantly and high in recent years wage increase and a weaker krona help keep price inflation high.
Expectations regarding interest rates abroad have increased
Since the last report, price dynamics have been slightly lower than forecast. On the other hand, economic activity is slightly higher than expected, and wage growth may seem slightly higher than forecast. At the same time, expectations regarding interest rates abroad have increased, and the koruna is slightly weaker than expected. Before the next one committee meeting on interest rates in June will receive more information on economic developments. We will then present new forecasts. Based on the information we have so far, we may need to keep interest rates higher for a little longer than we previously anticipated.
There is uncertainty about the economic outlook. If it becomes necessary to raise interest rates again to bring price increases to the target level within a reasonable time, the committee stands ready to do so. If there is a more severe slowdown in the Norwegian economy or there is a prospect of inflation falling more quickly to the target, interest rates may be reduced earlier than we predicted in March.
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Source: Norges Bank, Photo: pixabay
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