MNI: Norges Bank Cuts Key Rate To 0%: Text

     LONDON (MNI) - Policy rate reduced to zero percent Norges Bank's Monetary

Policy and Financial Stability Committee has unanimously decided to reduce the

policy rate to zero percent.

     Activity in the Norwegian economy has fallen abruptly as a result of the

coronavirus pandemic. The downturn is amplified by the severe impact of the

pandemic on surrounding countries and by a sharp fall in oil prices. Lower oil

prices have contributed to weakening the krone exchange rate.

     The uncertainty surrounding developments ahead is unusually high. Economic

activity is expected to pick up as containment measures are eased, but it will

likely take time for output and employment to return to the levels prevailing

before the pandemic.

     Low interest rates cannot prevent the coronavirus outbreak from having a

substantial impact on the Norwegian economy, but can help dampen the downturn.

As the situation normalises, low interest rates will support a faster rebound in

activity. This may reduce the risk of unemployment becoming entrenched at a high

level.

     The outlook and the balance of risks imply a very expansionary monetary

policy stance. In March, the policy rate was reduced from 1.5 to 0.25 percent.

At the monetary policy meeting on 6 May, the Committee decided to reduce the

policy rate to zero percent.

     "In the Committee's current assessment of the outlook and balance of risks,

the policy rate will most likely remain at today's level for some time ahead. We

do not envisage making further policy rate cuts", says Governor Oystein Olsen.

     Changes in the policy rate take effect from the first business day after

the interest rate decision is announced.

     For further analysis, see Monetary Policy Update May 2020

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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