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  • Central Bank of Norway Joins Australia in Wait 0 comments
    Feb 4, 2010 2:53 AM

    The Central Bank of Norway joined Australia in pausing its rate hikes, keeping its key rate at 1.75%.

    The recovery in Norway and abroad has taken hold, and Norges Bank has raised the key rate in two increments to 1.75 per cent. The Executive Board’s strategy is that the key rate should be in the interval 1.25 - 2.25 per cent until the publication of the next report in March.
    The Norweigan economy is one of the strongest in Europe, and the developed economies thanks in part to large oil resources, and natural resources e.g. one of the largest fish exporters. It has also well managed its oil resources by investing a large proportion of the proceeds in a sovereign fund.

    But it is not without problems, it still relies on the health of other economies to export to. It also faces the issue of rising house prices.
    Inflation is now slightly below 2.5 per cent. Activity is rising, but there are still available resources in the Norwegian economy. House price inflation is high and household demand is increasing. Exports appear to be picking up somewhat faster than expected. On the other hand, petroleum investment may be lower than projected.
    The Norweigan central bank also pointed out some truisms/observations on the global economy. This is important to Norway as it derives a lot of income from exports, and tends to run large surpluses. It also has had one of the most astounding records in productivity growth.
    The world economy is rebounding but activity is low and unemployment is high in the US and in Europe. Growth is holding up in emerging economies, but is likely to be moderate in the US and Europe. Key rates are close to zero in many countries and are expected to remain low for some time ahead.

    Thus we are likely to see the central bank of Norway leave rates on hold for the immediate term, but with due observance of the monetary policy activities of other nations.

    Disclosure: "No positions"
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