August 15, 2019 / 8:27 AM / 2 months ago

UPDATE 2-Norway holds rates unchanged, says outlook more uncertain

* Rates on hold in August, as expected

* Outlook for monetary policy rates now more uncertain

* Crown trades slightly weaker (Adds analysts, background)

By Victoria Klesty and Terje Solsvik

OSLO, Aug 15 (Reuters) - Norway’s central bank kept its main interest rate unchanged on Thursday, as expected, and said the policy outlook had become more uncertain amid rising global risks.

The central bank had previously said it would probably raise rates by the end of the year, with September as the most likely month for a hike, and the crown currency initially weakened against the euro.

“Overall, new information indicates that the outlook for the policy rate for the period ahead is little changed since the June Report. The global risk outlook entails greater uncertainty about policy rates going forward,” the central bank said.

Waging an increasingly lonely campaign, Norges Bank has raised rates three times since September and repeatedly warned that further hikes may follow, even as other central banks have shifted to dovish positions.

The crown currency weakened slightly after the announcement before rebounding most of the way.

A Reuters survey of 31 economists had unanimously predicted the key policy rate would remain on hold at 1.25% on Thursday.

Defying a global economic slowdown, Norway is headed for its fastest expansion in seven years in 2019 thanks to an investment boom in its oil and gas industry, and rising government spending.

“The upturn in the Norwegian economy is continuing broadly as expected in June,” Norges Bank said, while adding that inflation was slightly lower than projected.

“Deepening trade tensions and heightened uncertainty surrounding the UK’s relationship with the EU may weigh on growth abroad and in Norway. On the other hand, a weaker (crown currency) may contribute to higher inflation ahead,” it added.

The statement allows Norges Bank to buy some time before deciding its next move, DNB Markets economist Kyrre Aamdal said.

“They did not state that it was most likely with a rate hike in September which they could have done,” he said.

Nordea Markets said a hike was still likely next month however.

“It means that there will be a September hike, but that uncertainty after that has increased, and that they will have to wait and see,” Nordea economist Erik Bruce said.

Only five of the economists polled by Reuters ahead of the decision predict that the central bank will stop raising rates altogether.

The U.S. Federal Reserve last month reduced its key rate, as have several other central banks. The European Central Bank all but pledged it too will soon cut and the Bank of Japan has also hinted at more easing. (Editing by Hugh Lawson)

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