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Norwegian Krone Rises, Ignoring Interest Rate Cut

March 17, 2016 at 9:55 by Vladimir Vyun

Focus on 100-krone noteThe Norges Bank was yet another central bank to hold policy meeting today. The bank made a decision to cut its key interest rate. Surprisingly enough, the Norwegian krone gained against its major peers despite the news.

Norway’s central bank held a policy meeting today, but unlike the Swiss National Bank it made changes to its policy. Namely, the bank cut its main interest rate by 25 basis points to 0.5%. Governor Øystein Olsen cited following reasons for the decision:

Growth prospects for the Norwegian economy have weakened somewhat and inflation is expected to moderate further out.

Furthermore, Olsen signaled about possibility of another rate cut:

The current outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the course of the year

Nevertheless, the krone remained firm, even though currencies usually have negative reaction to reductions of borrowing costs by their central banks. The most likely reason for the strong performance was the rally of crude oil. Norway is the biggest oil producer in Europe.

USD/NOK dropped from 8.4511 to 8.3766 as of 9:52 GMT today. EUR/NOK was down from 9.4892 to 9.4649.

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