The Norwegian krone slumped today after the nation’s central bank unexpectedly cut the key policy rate and signaled that another rate decrease is probable.
Norges Bank slashed its main interest rate 25 basis points to 0.75 percent at today’s policy meeting. Such decision was not expected by the majority of market participants and analysts. Governor Oeystein Olsen cited following considerations for the move:
Growth prospects for the Norwegian economy have weakened, and inflation is projected to abate further out. The Board has therefore decided to lower the key policy rate now.
Oeystein also said that economic growth would likely be subdued by the fall of crude oil prices. Crude oil is the key export commodity of Norway.
As for the future of the monetary policy, the Governor said:
The current outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the coming year.
USD/NOK rallied 2.15 percent from 8.2853 to 8.4648 as of 16:38 GMT today while earlier the currency pair jumped to 8.4875 — the highest level since 2002. EUR/NOK advanced 2.65 percent from 9.2681 to 9.5149.
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