The deposit rate was kept at 1.5 percent for a 13th meeting, the Oslo-based central bank said today. The decision was predicted by all 18 economists surveyed by Bloomberg.
“Economic developments in Norway and abroad have been broadly in line with expectations. Against this background, the key policy rate remains unchanged,” Governor Oeystein Olsen said. “Economic growth among Norway’s main trading partners is still moderate. There are prospects that it may take even longer for key rates abroad to increase,” the bank said.
The pace of economic expansion in western Europe’s largest oil exporter is slowing as offshore investment abates and record household debt curbs consumer spending. Olsen warned last year he stands ready to cut rates should krone strength hamper the bank’s policy goals. Over the past 12 months, the currency has weakened about 8 percent against the euro, pushing underlying inflation to 2.6 percent this year, above the bank’s 2.5 percent target.
Mainland gross domestic product, which excludes oil and gas production, will expand 1.75 percent this year, less than the 2 percent it grew last year, the bank said in March. In 2012, GDP by that measure increased 3.4 percent.
Olsen has had to balance policy to contain the exchange rate without fueling a credit-driven housing bubble. Norwegian households are more indebted than at any time before, owing their creditors about twice their disposable incomes.A report this week 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 fell to 2.8 percent in April, after rising to 3 percent at the start of the year.
“News since the March monetary policy report has been somewhat on the strong side but this is offset by a weak assessment in the regional network, and low rates abroad,” Erik Bruce, senior economist at Nordea, said before the decision was announced.
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