Norway’s Finance Ministry named Oeystein Olsen as central bank governor starting on Jan. 1 in an appointment that may lead to a slower pace of interest-rate increases in the world’s seventh-largest oil exporter. Read more
Inevitable, really. Though we wouldn’t have expected the staid Norwegian central bank to be the first (?) to take up legal arms.
After the US Securities and Exchange Commission exposed Citi’s super senior subprime slip — in which the bank misled investors over its subprime exposure between July and October 2007 — now come the lawsuits.
The SEC fined Citi $75m for the subprime deception. Norges Bank is suing over $835m worth of losses on Citi shares and bonds incurred between January 2007 and 2009. (For those wondering — in addition to overseeing monetary policy, Norges also looks after the international investments of Norways’ humongous sovereign wealth fund).
But the 221-page complaint goes much further than just the super senior CDO/liquidity put kerfuffle. Read more
Money market rates have fallen swiftly after Norway’s central bank offered short-term liquidity to banks. Rates remain above those of last week, when they rose following slower-than-normal flows between banks. Tax payments are apparently to blame, reports Reuters:
Norges Bank promised two liquidity loans, called F-loans, in a move designed to reassure markets and which quickly brought down money market rates. The central bank also held out prospects for further loans… Read more
The increasing cost of electricity helped push consumer prices up 3 per cent in Norway in the year to February, Statistics Norway said today. Core CPI rose 1.9 per cent over the same period. The increase from January to February was 1.3 per cent, more than half of which was due to increases in the price of electricity.
The strong headline reading may pressure Norway’s central bank to raise interest rates sooner rather than later, said Action Economics in a research note. Read more
The Norwegian central bank is to keep its key policy rate at 1.75 per cent, and the executive board plans to keep it between 1.25 and 2.25 per cent until the publication of the next report in March. This comes in spite of bubble warnings from Nouriel Roubini.
Among the factors listed are a stronger-than-expected krone – although since mid-January the krone has been falling against the dollar – and has been falling against the euro since December. A rise in interest rates would tend to further strengthen the krone. Read more
The Norwegian central bank is risking an asset bubble by keeping interest rates close to the US benchmark in order to contain krone gains and protect exporters.
So says Nouriel Roubini, NYU professor, and, more important these days, one of the few who correctly predicted the financial crisis. “Even in Norway there is no willingness to raise rates – despite inflation and robust growth – because of concerns about the currency. That means you are feeding real estate and other bubbles,” Mr Roubini told Bloomberg in Oslo today. Read more
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