The Norwegian krone climbed today after Norway’s central bank left its key policy rate unchanged and signaled that there is a possibility of interest rate hike next year.
Norges Bank kept its main interest rate at 1.5 percent today. The bank explained that domestic fundamentals are good, but the European debt issues threaten the nation’s economy:
The level of uncertainty surrounding developments in Europe is now higher than it has been for some time. Although domestic developments have been slightly stronger than expected, the turbulence and weak growth prospects abroad suggest the key policy rate should be kept on hold.
The central bank predicted that the key rate would stay the same this year, but would slowly rise in 2013:
The analyses in this Monetary Policy Report imply a key policy rate at about today’s level towards the end of 2012. Thereafter, the key policy rate is projected to rise gradually towards a more normal level.
The Norwegian currency reacted positively to the statement.
USD/NOK fell from 5.9403 to 5.8979 as of 15:25 GMT today. That was the second consecutive day of krone’s gain versus the dollar, while the bullish trend of the Norwegian currency started at the beginning of this month.
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