Norges Bank Lowers Rate to Zero Percent
Posted on 05/08/2020
In March 2020, Norges Bank lowered the policy rate from 1.5% to 0.25%. At the Norges Bank monetary policy meeting on May 6, 2020, the Monetary Policy and Financial Stability Committee decided to reduce the policy rate to 0%.
According to the press release, “Activity in the Norwegian economy has fallen abruptly as a result of the coronavirus pandemic. The downturn is amplified by the severe impact of the pandemic on surrounding countries and by a sharp fall in oil prices. Lower oil prices have contributed to weakening the krone exchange rate.
The uncertainty surrounding developments ahead is unusually high. Economic activity is expected to pick up as containment measures are eased, but it will likely take time for output and employment to return to the levels prevailing before the pandemic.
Low interest rates cannot prevent the coronavirus outbreak from having a substantial impact on the Norwegian economy, but can help dampen the downturn. As the situation normalises, low interest rates will support a faster rebound in activity. This may reduce the risk of unemployment becoming entrenched at a high level.”