Nor­way cuts rate amid oil plunge

The Pak Banker - - COMPANIES/BOSS -

Nor­way's cen­tral bank cut its bench­mark in­ter­est rate to a record low and sig­naled it's pre­pared to ease pol­icy fur­ther to ward off a re­ces­sion in western Europe's big­gest crude oil pro­ducer. The overnight de­posit rate was low­ered by 25 ba­sis points to 0.50 per­cent, the Os­lobased cen­tral bank said on Thurs­day. The de­ci­sion was pre­dicted by 18 of 20 econ­o­mists sur­veyed by Bloomberg. The bank pre­dicted that its rate will bot­tom at 0.2 per­cent in the first quar­ter next year.

"The cur­rent out­look for the Nor­we­gian econ­omy sug­gests that the key pol­icy rate may be re­duced fur­ther in the course of the year," Gov­er­nor Oeystein Olsen said in a state­ment. The bank also warned that it can't rule out a neg­a­tive rate should the econ­omy be ex­posed to "new ma­jor shocks."

Even so, the bank said lower rates "could in­crease fi­nan­cial sys­tem vul­ner­a­bil­i­ties" and that it's now "pro­ceed­ing with greater cau­tion in in­ter­est rate set­ting."

The krone rose 0.6 per­cent to 9.435 per euro as of 10:13 a.m. Norges Bank has been cut­ting rates since De­cem­ber 2014 to avoid a re­ces­sion in the oil­re­liant econ­omy. Record eas­ing from the Euro­pean Cen­tral Bank and in neigh­bor­ing Swe­den has added pres­sure on Nor­way to keep the krone weak. The cur­rency has lost about 7 per­cent against the euro in the past year amid a 24 per­cent plunge in Brent crude over the same pe­riod.

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