The key rate influences short-term money market rates. The key rate and expectations concerning future developments in the key rate are decisive for banks' deposit and lending rates and for bond yields.
In addition to changing the key rate, Norges Bank can buy or sell NOK (intervene) in the foreign exchange market in order to influence the krone exchange rate. Norges Bank has the capacity to intervene in the foreign exchange market, but normally the Bank will not use interventions. Exchange market intervention, irrespective of whether currency is bought or sold, is not an appropriate instrument for influencing the krone over a longer period. However, interventions may be appropriate if the krone deviates substantially from the level that the Bank judges to be reasonable in relation to fundamentals, and if exchange rate developments weaken the prospect of achieving the inflation target. Interventions may also be appropriate in response to pronounced short-term fluctuations in the krone when liquidity in the foreign exchange market falls to a very low level. Norges Bank has not intervened in the foreign exchange market since January 1999.