The cycle of disinflation gripping much of the developed world has bypassed Scandinavia’s richest economy.
Norway central bank Governor Oeystein Olsen is signaling a willingness to tolerate more weakness in the krone, among the worst-performing currencies of the past year, even if that causes inflation to accelerate.
The dollar fell the most in 10 weeks against the euro after the Federal Reserve said it will keep interest rates at almost zero for a “considerable time” and cut the outlook for economic growth.
Norway’s inflation rate dropped in January to the lowest level since 2006, increasing the central bank’s scope to keep interest rates unchanged.
The krone will rally against the euro as the central bank raises its key rate on May 5 even as a stronger currency threatens to slow the nation’s economic rebound, according to Nordea Bank AB.
Norway’s economy will expand at a slower pace than previously forecast as weaker demand from crisis-hit Europe and a strong krone hurt exports, Statistics Norway said.
"We still believe rates will be kept on hold for a very long period."
- Erik Bruce on Aug 21, 2014