Norges Bank has lowered its key policy rate by 0.25 percentage points to 1.50 percent. The move largely caught markets off-guard. It is a little surprising that economists were so puzzled by it, since hints coming from the central bank had been showing it is concerned about the strong krone affecting exports.
A commitment to keep rates at 1-2 percent interval until next Monetary Policy Report in the summer was made barring any major shocks. Continued downturn and dim growth prospects were given as additional reasons for the move. Inflation expectations remain low, with under 1.5% inflation rate presumed for 2012. Euro gained almost 2% vs. the krone immediately following the announcement.
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