OSLO (Reuters) – Norway’s central bank is expected to leave its key interest rate unchanged this week at a record low 0%, after three cuts earlier in the year to combat the impact from the coronavirus pandemic, a Reuters poll of economists found on Monday.
The 31 participants in the poll were unanimous in predicting no change in the policy rate when the outcome is announced on June 18, in line with Norges Bank’s view that tightening is most likely years away.
Fearing a collapse of the economy amid the outbreak of the novel coronavirus, Norges Bank slashed its policy rate twice in March – first by 50 basis points to 1.0% and then by 75 points to just 0.25%.
Last month, defying most expectations, Norges Bank opted for a third cut, but said it did not intend to follow the central banks of the euro zone, Switzerland, Denmark and others into negative rates.
“In short, we expect the central bank to reiterate its forecast for the policy rate, implying that it stays at zero until the end of 2023,” Handelsbanken said in a note to clients.
“Despite positive signs, it is too early to conclude the outlook has changed materially,” it said.
Others predicted that Norges Bank’s revised forecasts could indicate a slightly earlier rise in rates than was foreseen last month.
“Although we have more information since May, Norges Bank will emphasise that uncertainty surrounding economic developments ahead is still unusually high,” Nordea Markets said.
“We see some potential for a higher rate path towards the end of the forecast horizon as the outlook does not seem as bleak as in May,” Nordea said.
(Reporting by Terje Solsvik, polling by Sarmista Sen in Bengaluru, editing by Larry King)
