OSLO: Norway’s central bank left its main interest rate unchanged at 0.75 percent on Thursday, as expected, but said it would tighten rates at a slightly slower pace than previously planned amid concerns about the prospects for the global economy.
The bank said it aimed to raise rates in March next year, in line with its forecast from September, when it raised rates for the first time in seven years.
“The most important message is that Norges Bank repeats a rate increase in March and another one later in 2019,” said Danske Bank Chief Economist Frank Jullum. “The rate path is adjusted a little bit downward in 2020 and 2021, affected by global events.”
The decision by the central bank was unanimous.
Norway’s currency, the crown, which had weakened in recent weeks with lower oil prices and global market turmoil, strengthened by 0.4 percent to trade at 9.7150 per euro following the announcement.
Norges Bank highlighted how rising protectionism through 2018 and political uncertainty had weakened growth prospects internationally.
“Persistent trade conflicts and turbulence surrounding political processes in Europe may dampen growth among trading partners more than projected,” the bank said, citing in particular how a no-deal Brexit could increase turbulence on financial markets.
At the advice of Norges Bank, the finance ministry simultaneously increased the amount of capital banks must hold on their balance sheets, increasing the counter-cyclical buffer requirement to better protect banks from a potential downturn.