Norway central bank okay with housing deflation

[OSLO] Norway's central bank is comfortable with house price deflation and will avoid policies that drive up the property market of Scandinavia's richest economy, governor Oeystein Olsen said.

The economy can withstand house price declines "over a longer period", Mr Olsen said on Tuesday in an interview at his office in Oslo. "We'll be concerned if housing prices and debt levels continue to grow. It doesn't have to be a concern with a moderate downward reaction in housing prices."

The housing market is showing signs it may be retreating from a half decade of increases during which record-low interest rates drove real estate prices to all-time highs. The central bank this month kept its main rate unchanged for a 10th meeting and predicted tightening will start in the "summer" as the economy picks up.