Norway central bank Governor Oeystein Olsen signaled that policy makers were preparing to cut interest rates today before a report released earlier this month showed inflation was higher than estimated in May
“It was uniquely on the downside at some point -- except for the krone -- and then came these price figures which point in the opposite direction, so in balance we ended up where we were,” Olsen said today in an interview. Policy makers didn’t consider cutting the rate today, he said.
Norges Bank decided to hold its benchmark deposit rate at 1.5 percent and signaled an increased chance for a cut this year amid weakening economic growth in western Europe’s largest oil producer.
Underlying consumer prices rose an annual 1.4 percent in May, faster than the 1.03 percent estimated by the central bank, a report on June 10 showed.
After cutting twice, Olsen has kept the benchmark unchanged for more than a year while saying the bank is ready to act to prevent krone gains from undermining its inflation target and the economy. The krone has slid 7 percent this year versus the euro as the bank also in March warned rates may be cut. It’s still up 19 percent since the end of 2008.
Norway’s $480 billion economy is starting to suffer from the fallout of the euro area’s shrinking economy, pushing unemployment to the highest since May 2010 as companies also struggle with a surging krone and manufacturing labor costs that are nearly 70 percent higher than the European Union average.
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