Norwegian Rates Status Quo
Negative Rates Being Considered Amid Oil Slump
CBJ — Norway’s central bank has sliced its main interest rate to a record low of 0.50% — the same as Canada’s — and it may be cut again to fight the prolonged economic downturn prompted by a significant drop in oil prices.
Rates might be cut to zero to help sustain the economy, with the drastic step of negative rates being considered, but only if the country’s national economy suffered a further shock.
A slump in crude oil prices has caused a slowdown in Norway’s oil and gas industry, which generates a fifth of economic output. Fears are growing the downturn will spread to the rest of the economy.
Although oil prices have rebounded around 45% from lows seen earlier in 2016, they are still down by about 65% from mid-2014. Energy companies operating off Norway are laying off tens of thousands of workers to preserve cash.
Norway’s central bank has been trying to balance the requirements of an economy that has slowed as oil prices plunged with the need to cool down the property market. It has reduced its cost of borrowing from 1.5% in December 2014.