🤯 Have you seen our AI stock pickers’ 2024 results? 84.62%! Grab November’s list now.Pick Stocks with AI

Norway central bank raises rate to 4.0%, eyes September hike

Published 08/17/2023, 04:14 AM
Updated 08/17/2023, 06:07 AM
© Reuters. FILE PHOTO: People go about their day near Norway's central bank building in Oslo, Norway May 31, 2017. REUTERS/Ints Kalnins/File Photo
EUR/NOK
-

By Gwladys Fouche and Terje Solsvik

ARENDAL, Norway (Reuters) -Norway's central bank raised its benchmark interest rate by 25 basis points to 4.0% on Thursday to try to curb inflation, as widely forecast, and said it would likely hike again in September.

Thursday's hike had been expected by all 31 economists polled by Reuters, and a majority of poll participants predicted the rate would hit a peak of 4.25% by the end of the third quarter, in line with the central bank's projection.

"What we are signalling at today's meeting is that most likely, if the economy evolves as projected, we will raise the policy rate in September," Norges Bank Governor Ida Wolden Bache told Reuters.

The crown briefly rose following the news but later weakened to 11.54 against the euro at 0951 GMT, from 11.52 just before the announcement.

Norway's annual core inflation, which excludes energy costs, stood at 6.4% in July, down from a record 7.0% in June, and has remained above the bank's 2% target since February last year.

"It has turned out more or less as Norges Bank predicted - inflation has been a bit higher which could have encouraged a slightly more aggressive rate increase but then the crown has strengthened a bit," Nordea economist Kjetil Olsen told broadcaster TV2.

If the currency proves to be weaker than projected or pressures in the economy persist, the policy rate may have to rise to more than 4.25%, Norges Bank said.

"If there is a more pronounced slowdown in the Norwegian economy or inflation declines more rapidly, the policy rate may be lower than envisaged," the central bank added.

Asked whether Norway was approaching a peak in rates, Bache said that Norges Bank had raised rates significantly over the past two years.

"We have come a long way, but our assessment at this time is that there is need for some more tightening going forward to bring inflation back to target," she said in an interview.

"At the same time, we do of course stress the uncertainty and the data dependency of our decisions going forward."

© Reuters. FILE PHOTO: People go about their day near Norway's central bank building in Oslo, Norway May 31, 2017. REUTERS/Ints Kalnins/File Photo

The Norwegian currency, which strengthened against the euro during the early parts of summer, has weakened following the release of milder July inflation data.

The European Central Bank last month raised its key policy rate to 3.75%, but a narrow majority of economists polled by Reuters expect the ECB to temporarily pause its rate-hiking campaign at its September meeting.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.