Norges Bank left unchanged its key interest rate, which is at a record low, amid signs that the economy of the biggest oil producer in Western Europe will avoid recession thanks to record budgetary and monetary stimulus. The interest rate was left at the level of 0.5%, as expected by the economists. The bank increased its forecast for interest in the long term, hinted that it may decrease again this year.
“There are still prospects that interest rates may be reduced in the course of the year”, commented the governor of Norges Bank, Oystein Olsen.
Although hit by lower oil prices, Norway managed to avoid introducing negative interest rates and unconventional monetary policy measures observed elsewhere. The government is spending record largest part from its revenue generated from the sale of oil and declines in interest rates in recent years have led to the depreciation of the NOK, which helps exporters outside the oil sector. The key indicators show that the bottom for the economy might be reached. And the economy has lost thousands of jobs in the oil industry. Recent data on Wednesday showed the unemployment rate was 4.6% in April against expectations of 4.7%.
Norway’s economy showed some positive signs and unemployment move slightly downward. She warned, however, that development is fragile. Since January, the NOK rose alongside oil as currency increased in value by 3% to about 9.34 NOK per EUR, while Brent rose by 80% over the same period. The central bank maintained its forecast for growth of 0.8% in 2016 unchanged, but lowered its forecast for 2017 to 1.6% from previous 1.8%.
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