Press release

Key policy rate reduced by 0.25 percentage point to 1.25 per cent

Norges Bank’s Executive Board decided today to reduce the key policy rate by 0.25 percentage point to 1.25 per cent with effect from 18 June 2009.

- We have made substantial cuts in the interest rate in response to the challenges generated by the crisis. The key policy rate has been reduced by 4½ percentage points since September.  It seems likely that domestic output will gradually pick up again, but inflation is expected to slow to around 1½ per cent in the coming year, says Deputy Governor Jan F. Qvigstad.

Norges Bank’s projections are approximately the same as in March, and the analysis in Monetary Policy Report 2/09 indicates that the key policy rate can remain close to 1 per cent for a period ahead. The global economic downturn continues. Activity is also contracting in Norway and unemployment is rising.

- Uncertainty with regard to developments ahead is still high. So far, the fall in global activity has been more pronounced than expected.  Confidence indicators for the corporate and household sectors nevertheless indicate that the fall in activity is moderating both in Norway and abroad. The functioning of financial markets has also improved somewhat, says Qvigstad.

For further information, see “The Executive Board’s monetary policy decision – background and general assessment” and Monetary Policy Report 2/09

Published 17 June 2009 14:00