Norway central bank raises rate to 3%, says more hikes likely
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- 24 Mar 2023
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Norway's central bank raised its benchmark interest rate by 25 basis points (bps) to 3.0% on Thursday to rein in inflation and said it would likely hike again in May and also after that to hit 3.5% by the summer.
Of the 26 economists polled earlier, 25 had anticipated an increase of 25 bps while one had bet on an increase of 50 bps. The poll had predicted that rates would peak at 3.25%. "There is considerable uncertainty about future economic developments, but if developments turn out as we now expect, the policy rate will be raised further in May," Norges Bank Governor Ida Wolden Bache said in a statement.
"The policy rate forecast has been revised up from the December Monetary Policy Report and indicates a rise in the policy rate to around 3.5 percent in summer," Norges bank said. The Norwegian currency, the crown, briefly rallied to 11.25 against the euro at 0901 GMT but later eased back to trade at 11.29.
"A higher policy rate is needed to curb inflation," Norges Bank said. Norway's core inflation, which excludes energy costs, stood at 5.9% in February, in line with the central bank's December forecast and down from a peak of 6.4% in January, with a price war among supermarkets easing some of the pressure.
The Norwegian currency has weakened by around 8% this year on a trade-weighted basis compared with Norges Bank's assumptions made in December, fuelling inflation. "If the (crown) proves weaker than projected, or pressures in the economy persist, a higher policy rate than currently projected may be needed to bring inflation down to target," the central bank said. Read More…
