The Norwegian central bank says the outlook for financial stability has deteriorated and that uncertainty is unusually high, when presenting its Financial Stability Report today. Governor Gjedrem stressed that "it is important that Norwegian banks now avoid excessive tightening of credit conditions as this might amplify the downturn in the Norwegian economy". Gjedrem also said in a statement that the central bank will continue with its extraordinary measures to strengthen banks' liquidity. We look for a 50 bp rate cut from the Norges Bank this month, but acknowledge the risk for larger rate cuts.
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