Global Easing Bonanza Continues As Norway, Taiwan Cut Rates To Spur Struggling Economies
On several occasions this year we’ve profiled Norway where the central bank, much like the Riksbank in neighboring Sweden, is walking a fine line between keeping rates low to support the economy (not to mention remain competitive in the global currency wars) and being mindful of the effect low rates have on an overheating housing market.
Like the Riksbank, The Norges Bank is in a tough spot. The property bubble quite clearly needs to be arrested but using monetary policy to rein in the housing market means leaning hawkish in a world of DM doves and that can be exceptionally dangerous especially when your economy is heavily dependent on oil and crude prices are crashing.
Indeed, the pain from low oil prices has become so acute that Norway may ultimately be forced to tap its $900 billion sovereign wealth fund in order to avoid fiscal retrenchment.
Given the above, no one was surprised (well, no one except PhD economists, most of whom got this one wrong) when the Norges Bank cut rates on Thursday, taking the overnight depo rate to a record low of 0.75%. Here’s Bloomberg:
Norway’s central bank cut interest rates to an all-time low and said it may ease policy further as it seeks to rescue an expansion in western Europe’s biggest petroleum producer amid a plunge in oil prices.
The overnight deposit rate was lowered by 25 basis points to 0.75 percent, the Oslo-based central bank said Thursday. The move was forecast by seven of the 17 economists surveyed by Bloomberg, with the remainder expecting no change. The bank forecast its rate may fall as low as 0.59 percent in third quarter of next year. The krone plunged 2 percent against the euro on the news, its biggest drop since August.
“Growth prospects for the Norwegian economy have weakened, and inflation is projected to abate further out,” Governor Oeystein Olsen said in a statement
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