Surprised the markets by lowering the base rate in Norway

Norges bank

Even imposing negative lending rates examines the central bank of Norway in its efforts to cope with the economic slowdown caused by the large decline in energy prices. It seems that neither Norway, one of the countries with the highest per capita income in the world, managed to escape from the problems that plague many other economies, large and small, showing that no one is immune in an interdependent global economy.

The central bank of Norway yesterday lowered interest rates from 1% to 0.75% and indicated it will pursue further reductions to support the cheimazomeni country’s economy. The news led to a fall in the Norwegian krone against the dollar to its lowest level in 13 years. Investors clearly taken aback by the intention of the Norwegian central bankers to follow so relaxed monetary policy, which is reflected in the decline of the koruna against the euro by 3%. “It’s a new era for the Norwegian economy. We are not any more into our own category, “he said at yesterday’s press conference the central banker of Norway Eistein Olsen. In an interview to Reuters, Mr. Eistein said that the chances for further reduction in interest rates next 12 months is 50%. He found out that the most likely scenario now is to just follow a further reduction in interest rates. “The possibility of reducing interest rates fall are moderate, at most 25%,” he said. Eistein.

But at the press conference the central banker hinted that there is the possibility of adopting negative interest rates in the future.

The central bank of Norway is trying on the one hand to deal with an overheated real estate market and on the other to boost an economy facing problems. Oil companies and gas operating companies, a sector which contributes 25% of Norwegian GDP cancel investments and lay off thousands of workers because they intend to be a long period of low energy prices. “I’m almost sure you will end up having the same interest rates with our neighbors, that we will have negative rates. This will happen in 2017-2018 “, provides, speaking to Reuters, Mr. Yan Antreasen, chief economist company eika, based in Oslo, referring to Sweden and Denmark. For Mr. Frank Gouloum, chief economist of the Danske Bank Markets, the central bank of Norway is preparing to cut interest rates once more before Christmas and another in 2016. “It is more negative than what we expected” He says. The central bank revised for the worse its forecast on the state of the Norwegian economy, saying it would outlast the low growth period. Plus predicts growth by 1.25% in 2016 from 1.50% previously (forecast excludes oil revenues).