Ida Wolden Bache: Monetary policy and the krone exchange rate

Speech by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the Centre for Monetary Economics (CME) / BI Norwegian Business School, Oslo, 9 November 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
11 December 2023

Accompanying charts to the speech


Good afternoon. I would first like to thank Tommy and the Centre for Monetary Economics at the Norwegian Business School BI for hosting what has become an important annual event for us.

[Chart: The krone has depreciated]

The topic for my lecture today is monetary policy and the krone exchange rate. The choice of topic is perhaps not entirely surprising given the attention the krone exchange rate has received over the past year. More surprising, many would say, is the level of the krone exchange rate. About a year ago, it cost 10.32 kroner to buy one euro. At the beginning of this week it cost 11.88 kroner. Measured against an import-weighted average of our main trading partners' currencies, I-44, the krone has depreciated by over 9 percent.

The depreciation has been a concern for many. As consumers, we notice that a weaker krone leads to higher prices for imported goods and more expensive holidays abroad. In the business sector, the picture is more mixed. For many firms, prices for imported intermediate goods will increase, at the same time as large exchange rate movements make it difficult for firms to budget and set prices for their products. On the other hand, firms in the tourism industry and trade-exposed industries may find that a weaker krone results in increased demand and improved profitability.