The Norwegian krone plunged today even though Norway’s central bank raised its benchmark interest rate, performing a rate hike for the fourth time over the year.
The Norges Bank raised its main interest rate by 0.25 percentage point to 1.5%. The hawkish stance of Norway’s central bank is in the stark contrast to central banks of other developed nations, which almost universally decided to embark on monetary easing. But the economic situation in Norway and abroad make it hard for the central bank to perform monetary tightening as aggressive as it was previously planning, and the statement noted:
The policy rate forecast indicates a slightly smaller rate rise than in the June Report. Weaker growth prospects and lower interest rates abroad have contributed to the downward revision. Slightly lower inflation and a somewhat less tight domestic labour market compared with the June projections have also pulled down the rate path.
USD/NOK rose from 8.9463 to 8.9672 as of 18:33 GMT after falling to the daily low of 8.8766 earlier. EUR/NOK rallied from 9.8692 to 9.9134, bouncing from the day’s minimum of 9.8112.
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