January 23, 2020 / 9:09 AM / a month ago

UPDATE 2-Norway keeps rates on hold, maintains outlook

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By Terje Solsvik and Gwladys Fouche

OSLO, Jan 23 (Reuters) - Norway’s central bank kept its key policy interest rate on hold at 1.5% on Thursday, in line with forecasts, and said the economy was developing largely as expected as global risks slightly softened.

Norges Bank raised rates three times last year but said in December that policy would most likely remain on hold for a period of time, although the probability of a hike was still greater than that of a cut.

All 40 economists polled by Reuters had expected rates to stay unchanged, and the majority of participants also predicted there would be no change for at least another 18 months.

“The Committee’s current assessment of the outlook and the balance of risks suggests that the policy rate will most likely remain at the present level in the coming period,” Norges Bank Governor Oeystein Olsen said in a statement.

While rates have so far been determined by Norges Bank’s executive board, Thursday’s decision was the first by a new policy-setting committee, consisting of the governor, the two deputy governors and two external economists.

Norges Bank said it would makes some changes in the way it communicates about monetary policy, reporting on the exchange of views among committee members and whether there is any dissent among them.

Still, detailed minutes will not be published, as is the case today.

The Norwegian crown currency strengthened slightly against the euro to trade at 9.9627 at 0912 GMT against 9.9750 just ahead of the 0900 GMT announcement.

“The market was well prepared for this outcome,” Nordea Markets wrote in a note commenting on the rate decision.

Analysts have said the Norwegian economy is expected to grow more slowly this year as investment by the country’s extensive oil and gas industry levels off.

“The risk of a sharp downturn in the global economy appears to have receded somewhat since autumn, but uncertainties surrounding global developments persist. Underlying inflation is close to the inflation target,” the central bank wrote.

October-December labour market data, released earlier on Thursday, showed an unexpected jump in unemployment to 4.0%, the highest level in 14 months and up from just 3.3% last April. Economists had predicted it would remain at 3.8%.

The crown last October hit an all-time low of 10.31 to the euro but has since recovered slightly. (Editing by Toby Chopra)

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