Norges Bank, the Central Bank of Norway, reduces the interest rate on commercial and savings banks' deposits with Norges Bank, the deposit rate, and on central bank overnight lending to these banks by 0.5 percentage point. With effect from 6 November 1996, the deposit and overnight lending rates are 4.00 per cent and 6.00 per cent, respectively.

Central Bank Governor Kjell Storvik states that the decision comes in response to recent developments in the money and foreign exchange markets. The krone exchange rate has been under persistent pressure and Norges Bank has purchased considerable amounts of foreign currency to curb the rise in the krone exchange rate. A reduction in Norges Bank's interest rates now seemed appropriate to reduce the appreciation pressure. In view of the strengthening of the krone exchange rate which has taken place, the interest rate reduction will not entail that monetary policy will have a more expansionary effect on the economy, declares Governor Storvik.

The central bank governor also points out that in Norway, where the primary objective of monetary policy is exchange rate stability, it is fiscal policy that must assume the main responsibility for stabilising the economy. In the light of pressures in the economy, Norges Bank emphasised in its submission to the Ministry of Finance on 14 October that a tight fiscal policy was necessary in 1997, at least in line with the budget proposal which is now being deliberated in the Storting (Norwegian parliament).