8: 55 AM EDT, August 10, 2011, by Marianne Stigset and Josiane Kremer
(Updates with Economist comment in the fifth subparagraph.)
Aug. 10 (Bloomberg) — Norwegian Central Bank held its benchmark interest rate unchanged after world market turmoil forced policy-makers to leave a scheduled increase.The overnight rate deposit was held at 2.25 percent for a second consecutive session, after a may increase, the Oslo-based bank said today. The decision was expected by three of the 14 Economist surveyed by Bloomberg. Eleven forecast a rise to 2.5 percent. "In particular, the decision must be seen against the background of the recent flare up in financial market turbulence and clear signs of weaker growth internationally, "said Governor Oeystein Olsen in the statement. "The Norwegian economy is still growing a robust pace and domestic developments have is broadly in line with those projected. This suggests that the key interest rate should be further increased. "Policymakers respond to a global stock market retreat that European shares plunge more than 20 percent from a peak of February on the concerns that the region will not contain the debt crisis saw. At the same time the bank must send rising consumer demand and credit growth stimulated by Europe's lowest jobless rate even if recoveries in the United States and the euro area. The bank has indicated that it does not want rates in Norway to wander far from borrowing costs in the rest of Europe The bank considered raising rates today, Olsen said at a press conference.The Crown gained 0.6% for trading at 1.7229 against the euro at 2: 21 pm in Oslo. Against the dollar, the Crown rose 0.4% against the dollar on 5.4265. Changed ' Radical ' "the image of the international economy has changed radically in the summer," said Erik Bruce, an economist at Nordea Bank AB in Oslo, via the phone. "There are clear signs of the Norwegian economy, or at least Norwegian financial markets, being affected by what is happening now. As things look now, they will keep rates on hold "for the foreseeable future.The European Central Bank last week held its rate unchanged and resume bond purchases after Italian and Spanish yields rose on speculation the third and fourth-largest economies of the euro zone perhaps bailouts.The u.s. Federal Reserve yesterday promised to keep its benchmark interest rate close to zero to at least consider the middle of 2013, fueling speculation Chairman Ben s. Bernanke embarking on a third round of quantitative easing. The announcement sent stocks higher and Treasury yields lower. ' long-term ' NervousnessFinance Minister Sigbjoern Johnsen said this week in Norway "long-term" nervousness in the markets must be prepared.In an interview in June, Olsen pointed out that the bank is ready to reconsider its tariff plans the debt crisis should move to "larger European countries."So far, the Norwegian economy is shielded from the debt crisis in Europe. The unemployment rate was 2.8% in July, matching Switzerland for the lowest rate in Europe. Housing prices will rise 8 percent this year, after earning 8.3 percent in 2010, the Norwegian real estate brokers Association said in credit growth of the January. Household accelerated an annual 7.1% in June, while underlying inflation, which energy costs and taxes, picked up 1.2 percent July of 0.7% in June. The central bank objectives price growth of 2.5%.The Mainland economy, oil and shipping excludes output, is expected to expand by 3 percent this year and 3.75 percent next year, the central bank forecast in June.--With the help of Meera Bhatia in Oslo. Editorial: Tasneem Brogger, Jonas Bergman.
Contact the reporter on this story: Josiane Kremer in Oslo on jkremer4@bloomberg.net
Contact the editor responsible for this story: Tasneem Brogger on tbrogger@bloomberg.net
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