Norges Bank lowers its deposit and lending rates
Norges Bank, the Central Bank of Norway, has reduced the interest rate on commercial and savings banks' sight deposits with Norges Bank, the deposit rate, and the interest rate on central bank overnight loans to banks by 0.5 percentage point. With effect from 28 January 1999, the deposit and overnight lending rate are 7.50 and 9.50 per cent respectively.
The decision to lower interest rates has been taken in response to developments in money and foreign exchange markets and the prospect of reduced pressures in the economy.
Central Bank Governor Svein Gjedrem points out that monetary policy is oriented with a view to returning the exchange rate over time to its initial range as defined in the Exchange Rate Regulation. The interest rate differential against euro countries is substantial. A tight government budget for 1999 and high interest rates over the last five months are curbing pressures in the economy. Price and wage inflation will gradually be reduced. Price and wage inflation which over time is on a par with euro countries is a precondition for a stable exchange rate against the euro. Moreover, monetary policy must not contribute to a downturn which undermines confidence in the krone. "In view of the appreciation of the krone and the prospect of reduced pressures in the economy, it is now appropriate to lower interest rates", says the Central Bank Governor.
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