The Norwegian krone managed to gain on the US dollar even though the greenback was generally strong today, rebounding after yesterday’s losses. The most likely reason for that was the interest rate hike by Norway’s central bank.
The Norges Bank raised its main interest rate by 25 basis points to 1% at today’s monetary policy meeting. The central bank mentioned strength of the domestic economy:
The Norwegian economy is expanding at a solid pace, and capacity utilisation now appears to be slightly above a normal level. Underlying inflation is a little higher than the inflation target.
Indeed, the economy fared even better than was previously expected:
The upturn in the Norwegian economy appears to be stronger than anticipated earlier.
At the same time, developments outside of Norway did not look so hot:
The uncertainty surrounding global developments and the effects of monetary policy suggests a cautious approach to interest rate setting.
The statement added further:
There are prospects for weaker growth and lower interest rates abroad.
Despite the outside risks, though, the Norges Bank is still expecting to continue raising interest rates:
Overall, the outlook and the balance of risks imply a gradual interest rate increase ahead.
In fact, the bank may be hiking rates this year faster than was previously expected:
The policy rate forecast indicates a slightly faster rate rise in 2019 and a somewhat lower policy rate further out than projected in the previous Report.
USD/NOK was down from 8.4929 to about 8.4705 as of 18:24 GMT today, while its daily low was at 8.4099. EUR/NOK slumped from 9.7031 to 9.6173.
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