Wednesday, Norway's central bank lowered its key policy rate by 0.50 percentage point to 2%. The decision matched economists' expectations. In February, the central bank had reduced their interest rate by 0.50 percentage points to 2.50%.
The central bank deputy governor Jan F. Qvigstad said, The outlook for the global economy has deteriorated. In order to mitigate the impact in Norway, the interest rate is being reduced .
The Norges Bank also lowered its interest rate outlook. The Executive Board aims to keep the key policy rate between 1% and 2%, till the publication of the next Monetary Policy Report on 17 June 2009, unless the Norwegian economy is exposed to new major shocks, the central bank said in a statement.
The analysis in Monetary Policy Report 1/09 showed that the key policy rate might drop 1% in the course of the autumn.
The decline in activity in the Norwegian economy may be more pronounced than previously assumed, the central bank said.
In order to cushion the decline in activity and prevent inflation from falling too far, it is appropriate to set the interest rate at a low level, said the central bank official noted.
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