Norges Bank Seen Keeping Rates Unchanged to Avoid Krone Gains

Norway’s central bank will probably keep interest rates unchanged this week to avoid spurring a rally in the currency, according to analysts surveyed by Bloomberg.

The bank will leave its overnight deposit rate at 1.5 percent in a decision due to be announced at 10 a.m. tomorrow in Oslo, according to all 18 economists surveyed.

Norges Bank Governor Oeystein Olsen managed last year to halt a rally in the currency that had hurt exporters and kept inflation below target after warning he may cut rates. The krone has weakened about 8 percent against the euro during the past 12 months, pushing underlying annual inflation to 2.6 percent this year, above the bank’s 2.5 percent target.

“One reason for them to sit still is that they don’t want to be accused of talking up the currency,” said Harald Magnus Andreassen, chief economist at Swedbank AB. (SWEDA) “The bank will recognize that retail sales came in positive and that the housing market has stabilized, but we don’t expect to” see any further signals from policy makers, he said.

The central bank in March stuck to plans to tighten in mid-2015 to support a recovery in Scandinavia’s richest nation. An economic expansion has eased as stagnant crude prices threaten investments in Norway’s oil-rich economy and after housing prices slid at the end of last year. A report yesterday from Real Estate Norway showed house prices rose in April, and are now 0.3 percent higher than in 2013.

A separate report last month showed retail sales unexpectedly rose 1 percent in March, the biggest jump since May last year. Registered unemployment declined to 2.8 percent in April, after rising to 3 percent at the start of the year.

“It’s become more obvious now that the bottom has not fallen out of the housing market,” said Kari Due-Andresen, senior economist at Svenska Handelsbanken AB. (SHBA) “We’re seeing a leveling out” in the housing sector, which has “lightened the mood in Norwegian households,” she said.

The central bank’s regional network report released Monday showed that output increased “somewhat less” than expected by enterprises while the outlook for growth is unchanged from February.

To contact the reporter on this story: Saleha Mohsin in Oslo at smohsin2@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net Tasneem Hanfi Brogger

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