Monday, June 17, 2024

Norges Bank

Norges Bank is the central bank of Norway. and promote economic stability in Norway.

Norges Bank also manages global government pension funds and the bank’s own foreign exchange reserves.

Norges Bank’s mission is to promote economic stability and manage substantial assets on behalf of the Norwegian people.

Norges Bank has executive and advisory responsibilities in the area of ​​monetary policy and is responsible for promoting robust and efficient payment systems and financial markets.

Norges Bank is responsible for the management of Norway’s foreign exchange reserves and manages the Government Pension Fund Global (GPFG) on behalf of the government.

GPFG’s investment strategy aims to achieve the highest possible returns within the framework of the investment mandate.

Norges Bank is an independent legal entity owned by the state.

Authorization

Norges Bank’s activities are regulated by the Central Bank Act (Official Norwegian version on Lovdata).

The Act provides that the purpose of central bank activities is to maintain monetary stability and to promote the stability of the financial system and an efficient and secure payment system .

The central bank will support high and stable output and employment .

The government regulates the inflation target of monetary policy in accordance with the Norges Bank Act.

Norges Bank’s responsibility for managing the Government Pension Fund Global (GPFG) is regulated through regulations issued under the Act relating to Government Pension Fund Global and through a separate management agreement with the Ministry of Finance. See the management mandate of the Global Government Pension Fund (NBIM).

Core Responsibilities

The Bank’s operating organization is based on clearly defined core activities:

Monetary Policy

Its monetary policy aims to maintain monetary stability by keeping inflation low and stable .

Norges Bank sets interest rates with an operational target of inflation approaching 2% over time.

Since the primary goal of monetary policy is low and stable inflation, it can be said that Norway has an inflation-targeting monetary policy system.

Inflation targeting should be forward-looking and flexible in order to help achieve high and stable output and employment and address financial imbalances.

The purpose of Norges Bank’s liquidity management is to ensure that the Executive Board’s interest rate decisions have a broad impact on short-term money market rates.

This is achieved by controlling the level of bank reserves (i.e. the deposits banks have with the central bank). More information about liquidity and markets.

Financial Stability

Norges Bank should promote financial stability and contribute to a robust and efficient financial infrastructure and payments system. More information about financial stability.

Norges Bank’s settlement system settles interbank payments in Norges Bank’s bank accounts and provides banknotes and coins to society in a way that increases the efficiency of the payment system. Norges Bank also oversees the Norwegian payment system.

Asset Management

Norges Bank manages the Norwegian Government Global Pension Fund on behalf of the Ministry of Finance. For more information please visit the Norges Bank Investment Management website.

Foreign exchange reserves are the bank’s emergency funds in international currencies and can be used for foreign exchange market transactions. More information on foreign exchange reserves.

Norges Bank manages government debt under a mandate set by the Ministry of Finance. Under the mandate, the bank is supposed to meet the government’s borrowing requirements and manage outstanding government debt. More information on government debt management.

Policy Rate

The main monetary policy tool is the policy rate, which is the interest rate that banks pay on deposits with Norges Bank up to a specified limit.

The policy rate is the Norges Bank’s main tool for stabilizing inflation and developing the Norwegian economy.

Norway’s policy rate is the interest rate that banks pay on overnight deposits with Norges Bank up to a specified limit.

Policy interest rates and policy interest rate expectations mainly affect inter-bank interest rates and bank customer deposit and loan interest rates.

Market exchange rates in turn affect the krona exchange rate, security prices, house prices, credit demand, consumption and investment.

Norges Bank’s policy interest rate will also affect expectations for future inflation and economic development. In other words, the policy rate depends on many important economic variables.

The policy rate is set by the Executive Board of Norges Bank. Typically, the Executive Board makes eight monetary policy decisions each year.

The meeting of the Executive Committee where the decision on monetary policy is taken is called the Monetary Policy Meeting.

In order for the level of the policy rate to reflect the level of other market interest rates, Norges Bank manages the total deposits of banks with Norges Bank so that banks can benefit from lending to each other at rates close to the policy rate.

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