Latest news with #NorgesBank
Free Malaysia Today
12 hours ago
- Business
- Free Malaysia Today
Norway's central bank announces surprise rate cut
Norges Bank lowered its policy rate by a quarter point to 4.25% and said it could make another cut this year. (Reuters pic) OSLO : Norway's central bank announced a surprise interest rate cut today, citing economic uncertainty linked to trade tensions and escalating conflicts. Norges Bank lowered its policy rate by a quarter point to 4.25% and said it could make another cut this year 'if the economy evolves broadly as currently projected'. The bank had kept its rate unchanged since December 2023 after hiking them in efforts to tame inflation. Analysts had expected the bank to keep its rate unchanged until September. Norges Bank governor Ida Wolden Bache said inflation had declined since its March monetary policy meeting. 'The inflation outlook for the coming year indicates lower inflation than previously expected,' she said. 'A cautious normalisation of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary.' Core inflation – which excludes volatile energy prices – slowed to 2.8% in May. While it is cooling, inflation remains above the central bank's 2% target. The rate cut comes as financial markets worry about the economic impact of US President Donald Trump's tariffs and the conflict between Israel and Iran. 'The uncertainty surrounding the outlook is greater than normal,' Norges Bank said in a statement. 'An escalation of conflicts between countries and uncertainty about future trade policies may result in renewed financial market turbulence and could impact both Norwegian and international growth prospects,' it said. 'If the economy takes a different path than currently envisaged, the policy rate path may also differ from that implied by the forecast,' the bank added.
Free Malaysia Today
12 hours ago
- Business
- Free Malaysia Today
Euro zone bond yields nudge up following Fed decision
The Swiss central bank is expected to cut its policy rate to zero from 0.25% today. (EPA Images pic) BRUSSELS : Euro zone yields were slightly higher today after the US Federal Reserve held rates steady the day before, with investors still nervously watching developments in the Middle East. The US central bank kept interest rates unchanged as widely expected yesterday, with chair Jerome Powell saying he expected to see more tariff-driven price hikes in the coming months. Meanwhile, financial markets were on edge over the possible entry of the US into the week-old Israel-Iran air war, ahead of central bank policy decisions in Switzerland, Norway and the UK later in the day. Germany's 10-year bond yield was up 2.4 basis points on the day at 2.52%, retracing some of the previous day's fall, but still trading within its recent range. The yield on the two-year Schatz was up 1 bp at 1.856%. The Swiss central bank is expected to cut its policy rate to zero from 0.25% today, but with a strong chance that rates return to negative territory at some point this year. Markets anticipate the Norges Bank and the Bank of England will leave their respective rates unchanged, and investor focus will be on their policy outlooks for the rest of the year. Italy's 10-year bond yield, the benchmark for the euro zone periphery, was 4 bps higher at 3.526%, leaving the gap between Italian and German yields wider at 99.50.
Local Norway
a day ago
- Business
- Local Norway
How will Norway's shock interest rate cut affect your finances?
What has changed? Norges Bank, Norway's central bank, announced that it is reducing its policy rate by a quarter point from 4.5 percent to 4.25 percent, following a unanimous decision of its Monetary Policy and Financial Stability Committee on June 18th. This marks the first cut in the interest rate in five years. While other central banks have reduced interest rates, Norges Bank has stuck fast to its 4.5 percent rate since December 2023. In a press conference, the bank said that the cut was the start of "a cautious normalisation of the policy rate", with the rate likely to be cut again over the next six months, probably in September and December, ending the year at just under 4 percent. In her press conference, the bank's governor Ida Wolden Bache conceded that the bank had not yet reached its 2 percent inflation target, but said that other economic considerations also needed to be taken into account. "The job of getting inflation back to target is not complete. But we believe the time has now come to ease the brakes a little." Advertisement What will the change mean to mortgage rates? Norway's largest bank, DNB, immediately followed the announcement with a quarter-point cut to its mortgage rate, taking the standard rate to 5.24 percent. Its competitors Nordea and SpareBank1 Sør-Norge followed shortly afterwards with their own cuts. This will bring welcome relief to homeowners with large mortgages. In six weeks' time, according to a calculation by Norway's public broadcaster NRK , a family with a 4m kroner mortgage will be paying about 800 kroner less a month in interest before tax. "It's gratifying that Norges Bank is reducing rates today," Norway's prime minister Jonas Gahr Støre, wrote in a post on Facebook. "This is especially good news for everyone who has a mortgage." However, in the press conference Bache said that she did not expect mortgage lenders to pass through all of the future cuts the bank is planning. The bank expects the average mortgage rate to fall from 5.6 percent today to 4.6 percent in 2028. Advertisement What will the cuts mean for property prices? Lower interest rates, and the prospect of still lower rates in the future, are likely to further push up the price of apartments and detached houses in Norway as buyers calculate they will be able to afford the payments on larger loans. What will the change mean for Norwegian krone exchange rates? The krone has been steadily strengthening against the US dollar since the start of this year, dropping from close to 11.5 kroner to the dollar to around 9.8 earlier this week. After the rate cut was announced it shot back to about 10 kroner. This is good news for people who live in Norway but who are paid in dollars or euro, bringing an effective pay rise. It is an effective pay cut, however, for foreigners living in Norway and earning in kroner, meaning any money sent to relatives or savings accounts outside Norway will be worth less. The weakening of the krone will also make it more expensive for people living in Norway to travel abroad, especially to the eurozone. A euro, worth only 8.13 kroner in 2014, is worth 11.55 kroner, up from 11.44 before today's announcement. Advertisement What will the cuts mean for inf lation? The inflation rate in May was 3 percent , still well above the bank's 2 percent target, although the bank said in its announcement that, excluding energy prices, inflation had been "lower than expected" in recent months. The bank said that it expected restrained wage growth to pull the inflation rate back towards 2 percent even with the rate cuts. In his Facebook post, Gahr Støre, said the government could take some credit for the decision to cut rates, as could Norway's unions. "The government has led a responsible and safe economic policy, and the working parties [unions and employers] have agreed on responsible wage settlements, so that price growth can continue to go down and help lay the foundation for interest cuts." There is a risk, however, that the central bank has miscalculated and that by cutting rates too early, it will allow inflation to start to rise again. Kjetil Storesletten, Professor of Economics at the University of Minnesota, said that he believed the bank was moving too soon to cut rates. " I think this was early. They probably thought that the Norwegian krone would finally strengthen. I expect that there will be a weak krone, and that there will be inflationary pressure in Norway," he told the TV2 broadcaster . With record low unemployment and oil money being spent, he believes that inflation will bounce back.
Local Norway
a day ago
- Business
- Local Norway
Norway's national bank announces surprise rate cut
Norges Bank lowered its policy rate by a quarter point to 4.25 percent and said it could make another cut this year "if the economy evolves broadly as currently projected". The bank had kept its rate unchanged since December 2023 after hiking them in efforts to tame inflation. Analysts had expected the bank to keep its rate unchanged until September. Norges Bank Governor Ida Wolden Bache said inflation had declined since its March monetary policy meeting. "The inflation outlook for the coming year indicates lower inflation than previously expected," she said. "A cautious normalisation of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary." Core inflation -- which excludes volatile energy prices -- slowed to 2.8 percent in May. While it is cooling, inflation remains above the central bank's two-percent target. Advertisement The rate cut comes as financial markets worry about the economic impact of US President Donald Trump's tariffs and the conflict between Israel and Iran. "The uncertainty surrounding the outlook is greater than normal," Norges Bank said in a statement. "An escalation of conflicts between countries and uncertainty about future trade policies may result in renewed financial market turbulence and could impact both Norwegian and international growth prospects," it said. The bank added: "If the economy takes a different path than currently envisaged, the policy rate path may also differ from that implied by the forecast."
Zawya
a day ago
- Business
- Zawya
Dollar firms as Mideast worries cast shadow, Norges Bank delivers surprise cut
SINGAPORE/LONDON - The dollar held mostly steady on Thursday as the threat of a broader Middle East conflict loomed over markets, while a flurry of central bank decisions including a surprise cut from Norway kept traders busy. Rapidly rising geopolitical tensions have boosted the dollar, which has reclaimed its safe-haven status in recent days. Iran and Israel carried out further air attacks on Thursday, with the conflict entering its seventh day. Concerns over potential U.S. involvement have also grown, as President Donald Trump kept the world guessing about whether the United States will join Israel's bombardment of Iranian nuclear sites. The Federal Reserve left rates steady on Wednesday, and now traders are counting down to a Bank of England (BoE) meeting due later in the day, with bets on no change to the base rate. The Swiss franc, meanwhile, was stronger against the dollar following an expected rate cut from the Swiss National Bank. But the surprise came from the Norges Bank, which delivered a 25 bps rate cut, while markets had expected the Norwegian central bank to hold rates. The dollar and the euro both surged against the Norwegian crown, and were last up 0.7% and 0.6% . The crown is still one of the top-performing major currencies against the dollar this year, with a gain of around 11%. Meanwhile, the euro was 0.1% weaker at $1.147. The yen last fetched 145.28 per dollar. The Swiss franc strengthened after the SNB avoided delivering a larger half-point cut. By 0930 GMT, the dollar was 0.4% down against the Swiss franc fetching 0.8157 francs, while the euro fell 0.3% to 0.9369. The dollar index, which measures the currency against six others, was flat at 98.9 and was set for about a 0.8% gain for the week, its strongest weekly performance since late February. Some analysts said investors were looking to cover their short-dollar positions. "The dollar seems ripe for a short-covering rally - especially if the U.S. wades into the Middle East conflict," said Matt Simpson, a senior analyst at City Index. Geopolitical concerns appear to have overshadowed the FOMC outcome, according to Christopher Wong, currency strategist at OCBC. "Risk aversion dominates sentiments, and that puts pressure on risk-sensitive FX." U.S. markets are closed on Thursday for the federal Juneteenth holiday, which could mean liquidity is lower. FED STANDS PAT In a widely expected move, the Fed held rates steady, with policymakers signalling they still expect to cut rates by half a percentage point this year, although not all of them agreed on a need for rate cuts. Fed Chair Jerome Powell said goods price inflation will pick up over the course of the summer as Trump's tariffs start to impact consumers. "Ultimately, the cost of the tariff has to be paid, and some of it will fall on the end consumer," Powell told a press conference on Wednesday. "We know that because that's what businesses say. That's what the data say from the past." The comments from Powell underscore the challenge facing policymakers as they navigate uncertainties from tariffs and geopolitical risks, leaving markets anxious about the path of U.S. interest rates. Still, traders are pricing in at least two rate cuts this year though analysts are unsure of the starting point. "The market is anticipating two 25 bp rate cuts this year, most probably September and December, but, we think the September FOMC will come too soon for the Fed to be comfortable cutting rates," ING economists said in a note. The Australian dollar fell 0.6% at $0.647, while the New Zealand dollar slipped 0.8% to $0.647. (Reporting by Ankur Banerjee in Singapore Editing by Jacqueline Wong, Muralikumar Anantharaman and Frances Kerry)
