The central bank of Norway has cut its benchmark rate of interest to a new record low while signaling it is prepared to ease its policy even further to stave off any recession in the biggest producer of crude oil in western Europe.
The deposit rate overnight was lowered to 0.50%, which was a drop of 25 basis points, said the central bank based in Oslo on Thursday morning.
The bank’s decision was predicted by economists. The bank has predicted that its rate would bottom out at no lower than 0.2% during the first quarter of 2017.
However, the bank’s governor said that the current outlook for the economy in Norway suggests the key rate might be lowered even further over the course of this year.
The bank warned, as well that it could not rule out negative rates should the country’s economy become exposed to any new major shocks.
The bank however, said that lower rates could help the vulnerabilities in the financial system and that it is proceeding with more caution in the setting of its interest rates.
Since December of 2014, the Norges Bank has cut rates to avoid the oil-reliant country from falling into a recession. Record easing at the European Central Bank as well as in its neighbor Sweden had put additional pressure on the government of Norway to keep its krone weak.
Its currency has dropped 7% versus the euro the last year amidst a plunge of 24% in the price of Brent crude during the same period.
The Federal Reserve in the U.S. held its rate target on Wednesday at between 0.25% and 0.50% while lowering its path of future rate hikes amidst worries over the growth globally.
The economy in Norway stalled during the second six months of 2015 and oil companies that operate in the country are cutting even more from planned investment while threatening to slash jobs and increase the country’s unemployment.
While the countries oil sector has experienced substantial slowdown, the economy on the mainland has maintained growth.
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