– The threshold for using other instruments will be very high, says Central Bank Governor Ida Wolden Bache. A weak krone has weakened further against our trading partners since the previous monetary policy report in September. This is shown by Norges Bank’s own import-weighted exchange rate index, the so-called I-44 index. With the exception of a few months this spring and this summer, the krona has not been so weak against our most important trading partners since the pandemic. In March 2020, the central bank intervened with a so-called currency intervention. In practice, Norges Bank told the foreign exchange market that the bank would buy Norwegian kroner if needed. The result was that the krone strengthened strongly in the following months. But doing the same is out of the question in the current situation, says the governor of the central bank. – We do not have a target for the krone exchange rate that we manage according to. Our instrument in monetary policy is the key interest rate. We are concerned with the krone exchange rate because it is important for the development of price growth, but also for the growth of the Norwegian economy. So the threshold for using other instruments will be very high, says Wolden Bache. – So a sustained weakening of the krona will not in itself be enough to intervene at a later stage? – When we intervened during the pandemic, there were completely extraordinary conditions in the Norwegian currency market, with low liquidity and very high uncertainty. Our assessment was then that the market had stopped functioning as normal. We are not there now, says the governor of the central bank. Unchanged policy rate at 4.25 per cent During the publication of Norges Bank’s interest rate decision on Thursday, the bank announced that the policy rate was kept unchanged at 4.25 per cent. And that there will probably be another interest rate jump in December. The decision to keep the key interest rate unchanged was in line with what the experts expected beforehand. – As we now assess the outlook, the key interest rate will probably be raised in December. Towards the meeting in December, the committee will receive more information about the price outlook. If we become more certain that the underlying price increase is on the way down, the interest rate can be kept calm, says Central Bank Governor Ida Wolden Bache. In the last monetary policy report from the central bank in September, the interest rate committee said that the key rate would most likely be raised once more, in December. But the language used in today’s press release is a little more subdued than in the last monetary policy report. Inflation becomes a joke The interest rate committee says in its justification that if the bank becomes more certain that the underlying inflation is on the way down, the key interest rate can still be kept steady. – The committee’s assessment is that the interest rate is now close to the level that is necessary to overcome the rise in prices, says the governor of the central bank. Nordea markets writes in a comment on the interest rate decision that the brokerage now expects that a possible new interest rate increase in December may be called off. Handelsbanken also says that, after today’s interest rate decision, it is slightly less likely that another interest rate jump will occur in December. Analysts now expect the October figures for core inflation to fall to 5.5 per cent, significantly lower than Norges Bank’s estimate for October of 6.0 per cent on a 12-month basis. Sharp fall in price inflation for several months in a row The Central Bank governs interest rate policy according to a politically determined target that the growth in consumer prices over time should be close to 2 per cent a year. The latest published figures for price growth from Statistics Norway show that the 12-month growth in prices increases almost three times as much as the target, if we look at the so-called core inflation. It is the increase in the price of consumer goods if you remove changes in the price of electricity and fuel as well as changes in taxes. Growth in the consumer price index was 3.3 per cent at the last measurement. In the last three months, the price increase on consumer goods has fallen sharply. The next publication of new figures for consumer prices from Statistics Norway is 10 November. 13 interest rate jumps in two years During the pandemic, the key interest rate in Norway was set to zero. Since the autumn of 2021, Norges Bank, like other central banks, has sharply raised its key interest rate. Due to high price growth, the central bank has raised the key interest rate a total of 13 times in the last two years.
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Will not defend the krone with extraordinary measures – news Norway – Overview of news from various parts of the country
