–Says Norwegian Krone Exchange Rate Very Strong In Real Terms
BRUSSELS (MNI) – The long-term interest rate outlook of market
participants is lower than the Norwegian central bank’s own forecasts,
Norges Bank Governor Svein Gjedrem said on Monday, adding that the
difference might be attributable to different outlooks for Norway’s
economy.
“Market participants believe it will take even longer for the
interest rate to move up to a more normal level,” Gjedrem said,
according to the text of a lecture delivered at Norway’s Centre for
Monetary Economics on Monday.
“In autumn 2012 we expect an interest rate of close to 3.5%, while
market participants expect an interest rate of around 2.75% per cent,”
Gjedrem added, saying that the “differences may indicate that the
central bank and market participants at times have divergent views
regarding developments in the Norwegian economy.”
Norway’s central bank left its key policy rate on hold at 2% at its
last policy meeting in August, but said it intended to raise rates
gradually to a “more normal level.” The country’s oil rich economy
weathered the global economic crisis better than most and the Norges
Bank was one of the first in the world to begin a tightening cycle in
the aftermath of the crisis.
“Our latest interest rate forecast suggests that the interest rate
will remain low for a long period,” Gjedrem said. “The projections
published in the June Monetary Policy Report suggest that the key rate
should be held at today’s level (of 2%) to around the end of the year
and then gradually be raised to a more normal level.”
“Inflation expectations are probably stable and real interest rates
are very low,” he said. “At the same time, the krone exchange rate is
very strong in real terms,” he added.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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