Norges Bank Governor Øystein Olsen on Thursday said the bank has room for manoeuvre in interest rate setting, in both directions.
The policy rates cannot achieve several goals simultaneously. "In the case of conflicting objectives, the choice of interest rate path will involve a trade-off between different considerations," Olsen said.
If monetary policy only took into account the low level of inflation, the key policy rate would be rapidly reduced and kept close to zero for a good while, he noted. A prolonged period of even lower interest rates would increase the risk that debt and asset prices will move to unsustainable level.
The central bank has been able to give weight to economic stability when setting the key policy rate, he added. However, policymaker will adhere to the primary objective of monetary policy, low and stable inflation.
by RTT Staff Writer
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