Norway’s central bank kept its main interest rate unchanged and said it may ease policy again as Scandinavia’s richest nation grapples with slowing petroleum investments.
The deposit rate was kept at 1.5% for a 14th consecutive meeting, Oslo-based Norges Bank said.
“The analyses imply that the key policy rate be held lower longer than previously projected,” Governor Oeystein Olsen said in a statement.
“There are prospects that the key policy rate will remain at about today’s level to the end of 2015, followed by a gradual rise. A further weakening of the outlook for the Norwegian economy may warrant a reduction in the key policy rate.”
The economy of western Europe’s largest oil exporter is slowing as offshore investment abates and record household debt weighs on consumers. A key survey by Norway’s statistics agency showed last week that oil companies predict investments will drop by as much as 21% next year as the industry grapples with high costs.
The krone fell 1.6% to 8.31 per euro as of 10 a.m. in Oslo.
“We are in for a period with growth below trend,” Erik Bruce, senior economist at Nordea Ban, said before the rate decision. Capacity utilization below normal levels points to “some slack” in the economy, he said.
As Norway considers the timing of monetary tightening, other central banks in Europe have returned to easing mode.
The European Central Bank this month cut its deposit rate below zero for the first time, while policy makers in Sweden have signaled they’re ready to lower rates next month to keep deflation from taking hold in the largest Nordic economy.
Olsen warned a year ago he stands ready to cut rates should krone strength hamper the bank’s policy goals. Over the past 12 months, the currency has weakened about 6% against the euro, pushing underlying inflation to 2.6% in March this year, as price growth exceeded the bank’s 2.5% target for the first time since 2009.
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