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Norway central bank signaled more than 50% chance of reduction in 2016

Norway central bank signaled more than 50% chance of reduction in 2016

OSLO: Edgy investors unable to read the central bank’s monetary policy are starting to add an “uncertainty” premium on the Norwegian currency. But Norges Bank Governor Oeystein Olsen says there’s nothing to worry about.

With the economy stuck in the mire, Olsen last week unexpectedly cut rates to an all-time low of 0.75 percent, sending the krone plunging to levels not seen in more than a decade.

The governor later said the currency move was sharper than expected.

But I wouldn’t “characterize that as volatility,” Olsen told Bloomberg after a speech in Oslo on Thursday.

Along with the Sept. 24 interest rate cut, the central bank signaled a more than 50 percent chance of another reduction in the coming year, should a drop in Brent crude exacerbate a slowdown in the oil-reliant nation. Almost a quarter of output and one in nine jobs are dependent on the petroleum industry in Norway.

That rate cut sent the krone down to its lowest level in 13-years against the dollar. The currency has since pared some of those losses amid an advance in oil prices. The krone was 0.2 percent weaker against the euro and traded at 9.4559 as of 11:54 a.m. in Oslo.

But analysts are not impressed.

“Due to the low predictability of the central bank, volatility is quite high,” said Esther Reichelt, a currency strategist at Commerzbank AG in Frankfurt. “It’s not attractive for investors to take risks in these currency pairs, so the liquidity is low, which again increases volatility,” she said, referring to trades against the Swedish krona and the euro.