BRUSSELS (MNI) – Norway’s weaker-than-expected first quarter GDP
increases the chance that the central bank will keep its key policy rate
on hold at 2.0% at its next meeting June 23.
Norwegian mainland GDP, measure which strips out the oil
contribution, rose 0.1% in the first three months of 2010, Statistics
Norway data showed on Thursday, down from 0.4% in 4Q last year.
That’s well below the consensus estimate of 0.4% and below the 0.5%
increase shown in the Norges Bank’s March Monetary Policy Report.
Weaker investment and public spending caused the downside surprise,
with gross fixed capital formation falling 11.0% on the quarter.
Since the Norges Bank’s policy-makers look closely at mainland GDP
when taking their monetary decisions, economists said the news made it
more likely that the central bankers would leave the key policy rate on
hold when they next meet and revise down their growth projections.
After its May meeting, the Norges Bank said rates would remain in
the interval 1.5%-2.5% until June 23.
“Today’s release is likely to represent downside news in the
context of the Norges Bank’s May assessment,” said Nick Verdi, an
economist at Barclays Capital.
“After all, today’s release pointed to weaker trends in consumer
spending, investment, exports and the labour market,” Verdi said.
Analysts at SEK in Stockholm agreed, saying the news posed a
downside risk to the forward-looking rate path, which will be released
in the June Monetary Policy Report.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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