OSLO, Jan 21 (Reuters) – Norway’s central bank kept its key policy interest rate on hold at a record-low 0% on Thursday as expected, and said the economy was developing largely as anticipated.
Norges Bank has said it plans to hike rates early next year as the economy recovers from the coronavirus pandemic, potentially making it the first among G10 central banks to raise the cost of borrowing.
“The committee’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at today’s level for some time ahead,” Governor Oeystein Olsen said in a statement.
“The sharp economic downturn and considerable uncertainty surrounding the outlook suggest keeping the policy rate on hold until there are clear signs that economic conditions are normalising,” Norges Bank added.
Norway’s currency, the crown, strengthened slightly to 10.2550 against the euro at 0914 GMT, up 0.2% on the day.
After being hit by higher unemployment and lower activity last year as the government sought to rein in the spread of COVID-19, Norway’s economy is expected to grow by 3.5% in 2021, according to a recent Reuters poll of economists.
The central bank has stressed that the speed at which the Nordic country can roll out its vaccination programme, which was initiated four weeks ago, is key to its economic forecasts.
“The recovery is now being held back by higher infection rates and stricter containment measures. At the same time, vaccination is well under way, and economic growth is expected to pick up further out in 2021,” Norges Bank said.
Thursday’s meeting was an intermediate one, which means that there was no separate update of the policy committee’s economic forecasts. Norges Bank’s next outlook revision, with detailed predictions for future rates, is due on March 18.
(Reporting by Victoria Klesty and Terje Solsvik, Editing by Gwladys Fouche and Catherine Evans)