Norway Cuts Key Rate Unexpectedly
March 20 2020 - 1:59AM
RTTF2
Norway's central bank lowered its key interest rate sharply by
75 basis points at an extraordinary meeting and signaled room for
more easing, as the negative impact of coronavirus, or Covid-19, on
the economy intensified further.
The Monetary Policy and Financial Stability Committee of Norges
Bank unanimously decided to cut the policy rate to 0.25 percent
from 1.00 percent, on Friday. The bank had lowered the rate by 50
basis points on March 13.
Still, the committee does not rule out a further rate cut.
Lower interest rates will make it easier for enterprises to
weather a difficult period and also help households facing reduced
income, the bank noted.
Policymakers observed that a number of businesses were closed
and unemployment increased markedly. The negative impact on the
world economy is intensifying, and oil prices have fallen
further.
Financial market stress has increased, and higher credit and
money market premiums make funding more expensive for Norwegian
enterprises. Moreover, the krone has depreciated sharply.
Nonetheless, Norway has room for economic policy manoeuvre, good
welfare arrangements and solid banks, Norges Bank said. "As such,
we are essentially well positioned to face the prevailing crisis,"
the bank added.
As part of a coordinated action late Thursday, the Norges Bank
and the US Federal Reserve entered a temporary swap line to improve
liquidity in the financial markets. The latest $30 billion facility
will be in place for at least six months.
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