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Norway keeps rates on hold, outlook intact

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By Terje Solsvik

OSLO (Reuters) – Norway’s central bank kept its main interest rate unchanged at 1.5% on Thursday as expected and said the economy had developed largely in line with forecasts made in September.

Norges Bank last month raised rates for the fourth time in a year amid solid domestic growth, but said further tightening was unlikely as the global economy gradually slows.

All 35 economists polled by Reuters had expected rates to remain on hold ahead of Thursday’s announcement, and only eight of those — less than one in four — predicted any hikes at all in the next several years.

“The Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at the present level in the coming period,” Norges Bank Governor Oeystein Olsen said in a statement.

The Norwegian crown currency weakened against the euro to trade at 10.1480 at 0825 GMT against 10.1287 just ahead of the 0800 GMT announcement.

“The upturn in the Norwegian economy is continuing broadly in line with expectations in September. Underlying inflation has been as projected. Global uncertainty persists, and interest rates abroad are very low,” the central bank wrote.

“At the same time, the weak (crown currency) may result in higher inflation ahead.”

The crown last week hit an all-time low of 10.24 to the euro and is trading near 18-year lows against the dollar, weighed down by global trade jitters and as investors reduce their risk exposure towards year-end, analysts have said.

“Norges Bank indicates no major change in its view. Hence, rates will remain unchanged at the December (policy) meeting,” Nordea Markets wrote in a note to clients.

The currency’s impact on inflation should nevertheless be closely watched, Nordea added.

“If the current (crown) weakness continues over the next couple of months, we should expect the rate path to be revised up in December,” it said.

(Editing by Gwladys Fouche and Catherine Evans)

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