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Olsen Speaks About Interest Rate Cut, Krone Down

February 15, 2013 at 4:28 by Vladimir Vyun

Denominations of Norwegian krone banknotesThe Norwegian krone fell today as the head of the central bank indicated that he may ease monetary policy as a measure to bring inflation, which was slowing due to the currency’s strength, closer to the bank’s target.

The annual underline inflation rate was at 1.2 percent last month, far below the Norges Bank’s target of 2.5 percent. Governor Oeystein Olsen suggested that the bank may act to boost prices and economic growth:

A pronounced weakening of growth prospects, or a krone that is too strong, may over time lead to inflation that’s too low. Such development would be counteracted by monetary policy measures.

It is a usual practice for a central bank to cut rates for making inflation accelerate, but it is a bit dangerous to speak about currency’s strength ahead of the Group of Twenty meeting, where currency manipulations will be discussed. Of course, Olsen said that policy makers will not target specific exchange rate, diverting blame for currency manipulation from himself.

USD/NOK rose from 5.5367 to 5.5421 and EUR/NOK went up from 7.3991 to 7.4067 as of 4:28 GMT today.

If you have any questions, comments, or opinions regarding the Norwegian Krone, feel free to post them using the commentary form below.

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