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Norway’s central bank raises interest rates by 50 basis points


A pedestrian walks through a closed entrance to enter the headquarters of Norges Bank, also known as the central bank, in Oslo, Norway, on Wednesday, October 29, 2014.

Krister Soerboe / Bloomberg | Bloomberg | beautiful pictures

Norway’s central bank on Thursday raised its benchmark interest rate by 50 basis points and flagged a possibility of further increases in September as inflation soars.

The increase brought Norges Bank’s current deposit rate from 1.25% to 1.75%, beating its previous forecast in June. Norwegian inflation hit an annual rate of 4.5% in July, up from 3.6% in June and well above the consensus forecast of 3.8%.

In announcing its decision, the Norges Bank’s monetary policy committee said activity in the Norwegian economy remained high, with little room to spare, while the unemployment rate continued to decline and at a very low level.

Policymakers have also noticed that price increases have widened in recent months and could signal that inflation will remain high for longer than previously expected. The central bank suggested that a faster rate hike now would reduce the risk of high inflation becoming “entrenched”, which would require a further tightening of monetary policy.

“Significantly higher policy is needed to ease pressure in the Norwegian economy and bring inflation down to the target level,” said Governor Ida Wolden Bache.

Thursday’s report also noted that there is a risk that “less spare capacity in the Norwegian economy and persistent global price pressures will lead to an increase in price inflation.”

However, the committee also acknowledged that while tightening monetary policy could cool the housing market and curb household consumption more quickly, there is also the risk of slowing global growth. than.



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