Norway cuts interest rates to a record low

The move brings that key lending rate down to just 0.75 percent, from the already-record-low level of 1 percent set in June.

Growth in the Norwegian economy is likely to remain low for a longer period than projected earlier owing to the fall in oil prices through summer.

Markets have taken the view that the other major central banks were under growing pressure to do more after the Federal Reserve delayed a hike in interest rates last week due in part to a soft global outlook.

The Norwegian krone, which has already lost much of its value against the euro and especially the dollar in recent months, weakened immediately after the announcement.

Some economists had anticipated a 25 basis points cut, but most expected the bank to stand pat.

The euro was 0.2 percent higher at $1.1210 staying away from Wednesday’s low of $1.1105, which was its lowest since September 4.

“Growth prospects for the Norwegian economy have weakened, and inflation is projected to abate further out”, he said. “We are no longer in a league of our own”, Governor Oeystein Olsen told a news conference, adding that the bank did not even discuss keeping rates on hold. As it turns out, policymakers were far more anxious than traders expected.

Analysts, though surprised by this decision, say there is still scope for more easing from Norges Bank. On the other hand, a weaker krone will contribute to strengthening the profitability of export and import-competing firms.

“The central bank said the outlook for the Norwegian economy is such that they may have to cut the key policy rate further in the coming year”.

Lower interest rates will do little to help alleviate Norway’s house price problem, which it acknowledged briefly in its statement. She also warned that household debt levels already are at a “threateningly high level”, which can lead to “great challenges” for an economy facing a transition away from oil.