UPDATE 2-Norway’s central bank keeps rates on hold, removes easing bias | Reuters

* 2017, 2018 view for key policy rate is now 0.5 pct

* March forecast was 0.4 pct

* Rate decision was unanimous

* Chances of rate cut or rate rise now equal -economists
(Adds detail)

By Camilla Knudsen

OSLO, June 22 Norway’s central bank kept its key
interest rate unchanged at 0.50 percent on Thursday, saying the
economy continues to show signs of recovery after a two-year
slump and rates remain low or negative among the country’s
trading partners.

The bank added a rate cut was no longer likely and that
rates would probably begin to rise in 2019. It had previously
said rates were more likely to fall than to increase in the
short term.

All 14 economists polled by Reuters had predicted the bank
would leave the deposit rate unchanged.

The bank said it expected the key policy rate would be 0.5
percent in 2017 and 2018, compared with a March forecast of 0.4
percent.

“The forecast is little changed on the March Report, but is
a little higher in 2017 and 2018, and a little lower towards the
end of the forecast horizon,” the central bank said in a
statement on Thursday.

Still, the bank said it expected the key policy rate would
stay at its current level in the period ahead.

Oil producer Norway has seen economic growth slow and
unemployment rise following the drop in crude prices since
mid-2014, but the central bank and the government both expect a
gradual recovery.

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“It was as we expected and actually moving from easing bias
to neutral bias on the short term,” said Frank Jullum, chief
economist at Danske Bank.

“They still expect the first hike to be at the end of 2019
or 2020. I think the first hike will be much sooner, at late
2018.”

Norway’s currency, the crown, strengthened against the euro
and the dollar after the bank’s decision, which was
unanimous.

“We were a bit unsure if they would remove the downside
bias, but they did and now it’s as likely with a rate hike as a
rate cut,” said Nordea Markets chief economist Kjetil Olsen.

“This indicates that we definitely have seen the rate bottom
and that the first rate hike is closer now.”
(Additional reporting by Ole Petter Skonnord, Terje Solsvik,
Lefteris Karagiannopoulos, Joachim Dagenborg, writing by Gwladys
Fouche, editing by Larry King)

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