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National bank criticised for cutting interest rates

Head of Norway's national bank, Svein Gjedrem (left), is criticised after another severe cut in interest rates on Wednesday. «Too aggressive» , says Professor Øystein Thøgersen.

Professor Thøgersen is not the only financial expert to be surprised by Gjedrem's severe cuts. 0.5 percent would be enough this time, the Professor thinks.

After yesterday's cut the interest rates have reached 3 percent in Norway.

Thøgersen is worried that the curve will be V-shaped over the next months, as the interest rates will probably be lowered further this autumn, before it will be increased again later. Within a year the rate will be back at 4 percent, Thøgersen predicts.

The national bank's main goal is to reach a level of 2.5 percent for the base rate within two years.

Economist Harald Magnus Andreassen is critical of the fact that the mandate is so single-tracked:

«There may be no reason to put more fuel to the fire even though the inflation is still low», Andreassen told Dagens Næringsliv.

Chief economist Øystein Dørum at bank DnB said the bank would probably lower the fixed rate as a result of the new cut of the base rate.

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