The central banks of Norway, Iceland and Denmark have also cut their interest rate to combat the recession, following the European Central Bank. The Norwegian central bank lowered its lead rate a further 0.50 percentage points to 1.5 percent in an attempt to reduce the impact of the weakened global economy on Norway. “New information has confirmed that the current global economic downturn is the deepest in the post-war period,” Norges Bank Governor Svein Gjedrem Jan F Qvigstad said.

Among factors indicating the slump were further decline in production, rising unemployment and slowing inflation in Norway. In April, seasonally adjusted registered unemployment was 2.8 per cent, up 0.2 percentage points from March. Some hopeful signs were that “growth has picked up in China, and there are signs that other emerging market economies are stabilising,” the central bank said. Norway is not a member of the European Union.
Denmark’s central bank lowered its lending rate by 0.35 percentage points to 1.65 percent as of May 11.The Danish bank said the discount rate and the current account rate would also be lowered by 35 basis points to 1.4 percent. Denmark is a member of the European Union, but not a member of the Eurozone.

Iceland’s central bank lowered its key interest rate by 2.5 percentage points to 13 percent, citing that “conditions for continued monetary easing are in place.” The North Atlantic country in March made its first cut since mid- October when the country was hit by the global credit crunch that saw its three major banks taken over by the state. Interest rates at the end of October were hiked to 18 percent, and Iceland in November secured a 2.1 billion dollar loan from the International Monetary Fund.

The central bank, Sedlabanki, said the Icelandic krona “has been broadly stable” since the monetary policy committee met in April when a second cut was announced. Year-on-year inflation rate has continued to fall and was 11.9 per cent in April compared to 18.6 percent in January, the bank said, adding that it expected “inflation will be close to the 2.5 percent target by early 2010.”
The bank said the economy was also projected to contract over weaker exports and investments as well as lower domestic demand. Current capital controls were to remain in place but the bank said there were signs they could gradually be eased.