BRUSSELS (MNI) – Norway’s central bank left its key policy rate at
2% for a fourth-straight meeting on Wednesday and said that the
country’s inflation rate was likely to be slightly lower than it had
expected.

In a dovish statement, the Norges Bank reiterated its plan to
gradually normalize the key policy rate and said that – aside from
inflation – other economic indicators, as well as the Norwegian krone
exchange rate, were developing in line with its projections.

“In Norway, inflation is low and somewhat below the central bank’s
target of 2.5%,” Norges Bank Deputy Governor Jan Qvigstad said in a
statement published on the central bank’s web site.

“Activity is increasing in the Norwegian economy, although there is
still some margin of spare capacity. Interest rates in other countries
are low. On balance, these factors suggest that the interest rate should
be kept unchanged at 2%,” Qvigstad added.

The central bank reiterated its plan to gradually normalise the key
policy rate, and to keep it in the interval 1.5%-2.5% until it updates
its forecast path and economic projections on October 27.

Today’s decision was in line with market expectations.

Most analysts and economists see the next hike coming at the end of
this year or early next year, with the central bank on hold as it waits
to assess developments in the international economy.

“Activity among some of Norway’s most important trading partners
increased more than expected in the first half of the year and growth in
Asia remains high,” the central bank said.

“However, growth prospects in the US have been lowered” and
“slightly slower growth is also likely in the euro area ahead,” it
added.

The Norges Bank is currently in a tightening cycle, raising the key
policy rate back to a “normal level” after slashing it to 1.25% in 2009
to stave off the impact of the global financial crisis. However, after
raising the rate to 2% in May, it has remained on hold at the past three
meetings in June, August and September.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]