MNI REVIEW: Norges Bank On Hold; Committee Sees Growth Slow

-New Committee Sees Evidence Of Domestic Growth Cooling; Economy Peaked

By David Robinson

     LONDON (MNI) - The Norges Bank left its policy rate unchanged at 1.5% on

Jan. 23, matching financial market expectations, as the Bank's newly formed

Monetary Policy and Financial Stability Committee (MPFSC) published its inaugral

accompanying assessment of the economic outlook.

     The following are points from the statement and policy announcement:

     -- The decision to leave the policy rate unchanged at 1.5%, along with

guidance that it was most likely to stay at that level for a prolonged period,

was as expected. "The Committee's current assessment of the outlook and balance

of risks suggests that the policy rate will remain at the present level in the

coming period," the accompanying statement said. The decision to leave the

policy rate on hold was unanimous.

     -- The change in presentation style saw the publication of the new 5 member

committee's assessment of developments. It noted that external economic

developments were pretty much as forecast, saying "Growth among Norway's trading

partners appears to be broadly in line with projections. Activity and confidence

indicators overall suggest continued moderate growth." 

     -The big picture from the new committee was that there has been no sharp

change since the December forecast round, which showed the policy rate most

likely to remain flat, albeit with a 40% chance of a hike this year.

     -- The committee cited evidence that the domestic economy was cooling.

"There are signs that growth in the Norwegian economy is slowing. Low GDP growth

in November suggests that the economy grew slightly less towards the end of 2019

than projected," the assessment said.

     As well as the soft 0.3% rise in mainland GDP in the 3 months through

November, the offshore oil industry is not bolstering growth, with the committee

noting that petroleum investment in 2020 may be lower than Norges Bank had

assumed in the December Monetary Policy Report.

     -- Norges Bank sketched out how the new committee would communicate on

policy, leaving the door open to further changes. Governor Oystein Olsen said

that "the Committee's assessment will reflect an exchange of views within and

assessments by the Committee, and any dissents will be reported."

     Detailed minutes, however, will not be published. Olsen left the door wide

open to future changes in its communication policy.

     -- While underlying inflation has been running close to the central bank's

2.0% CPI-ATE target, the committee said that averages from its internal models

showed inflation coming in a little lower than assumed in December.   

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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