In the last four years the Norwegian Krone, which has been perceived as a haven in the wake of the Eurozone crisis, has strengthened by almost 22 per cent against the Euro.
The Norwegian Krone Exchange Rate was in the region of 7.4985 against the Euro as of 11:56 am GMT
However, the Krone dropped to an almost two-week low against the common currency this morning, shedding 0.5 per cent and hitting 7.5034. The currency also posted declines against several of its other most traded rivals.
Norwegian consumer price data was largely responsible for the Krone’s fall.
Figures issued by Statistics Norway revealed that underlying inflation slowed from 1.1 per cent in February to 0.9 per cent in March – the slowest pace for 11 months.
This result has upped the pressure on Norges Bank to cut its benchmark interest rate and has driven the Krone lower.
Some industry experts have cited the Krone’s advance as one of the main things preventing inflation from rising to Norges Bank’s 2.5 per cent target for the last four years. It has also proved damaging to exporters.
As economist Kari Due-Andresen noted, the central bank: ‘can no longer look the other way while the inflation target is slipping. The very weak development in price growth will force Norges Bank to cut the interest rate. [But] as Norges Bank seldom acts on a meeting that is not backed up by a monetary policy report, we believe the cut will come in June, rather than in May.’
Last month policy makers refrained from altering the benchmark interest rate, and earlier this year Norges Bank Governor Oeystein Olsen implied that a rate increase won’t be occurring as early as some expected. Olsen stated: ‘The analyses suggest that the key policy rate be kept low longer than previously anticipated. The first increase in the key policy rate is now projected to take place in spring 2014.’
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