The Norwegian Krone has fallen to a 15-month low against the Euro after the governor of the Norwegian Central Bank Oeystein Olsen said that the key policy rate will remain at its current level or lower by the end of the year.
The Krone declined by its biggest margin since November 2011 against the US Dollar and also declined by 1.6% against the single currency Euro, after the Central Bank maintained its benchmark rate at 1.5% at Thursday’s policy meeting. Any change to the interest rate had initially been penned in for March 2014 but the new time frame was adjusted for one to occur at the end of 2014.
The Norwegian economy is beginning to suffer from the knock on effects of the Eurocrisis, unemployment in the Nordic nation has reached its highest level since May 2010 as Norwegian company’s struggle with a high valued Krone and weakening demand from the Eurozone. Norway faces a major disadvantage thanks to the Krones surge in the form of higher labour costs which are 70% more expensive than the European Union average.
Olsen said that Norwegian economic activity “appears to be lower than anticipated earlier. On the other hand, inflation has been slightly higher than projected and the Krone has depreciated somewhat.” Those were the main factors behind the board’s decision to neither raise nor lower the key policy rate.
After cutting rates twice, Olsen has kept the benchmark unchanged for more than a year while saying the bank is ready to act to prevent Krone gains from undermining its inflation target and the economy. The Krone has now slid 6.2 percent this year versus the euro as the bank also in March warned rates may be cut.
The Central Bank predicted the key rate would be 1.38% in the fourth quarter of this year, versus an earlier forecast of 1.45%.
Current Norwegian Krone (NOK) Exchange Rate
The US Dollar / Norwegian Krone Exchange Rate is currently trading in the region of: 5.8744
The Euro / Norwegian Krone Exchange Rate is currently trading in the region of: 7.7678
The Pound Sterling / Norwegian Krone Exchange Rate is currently trading in the region of: 9.0723
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