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Financial News: Norway Central Bank Raises Key Rate To 2.50%

Norway Central Bank Raises Key Rate To 2.50%

11/03/2022 - 12:57:00 (RTTNews)

(RTTNews) - The Norwegian central bank raised its benchmark interest rate further by 25 basis points in its November meeting, and policymakers hinted that there will be another rate hike in December in order to curb soaring inflation.

The Monetary Policy and Financial Stability Committee, headed by Governor Ida Bache, unanimously decided to raise the policy rate from 2.25 percent to 2.50 percent, Norges Bank said in a statement on Thursday.

The previous change in the rate was a 0.50 percent hike in October.

"Based on the Committee's current assessment of the outlook and balance of risks, the policy rate will most likely be raised further in December," Norges Bank said.

The outlook is more uncertain than normal, the bank said.

The bank started raising the interest rate in October 2021, from zero percent to the current 2.50 percent to rein in the runaway inflation.

Recent data showed that Norway's consumer price inflation rose to over a 34-year high of 6.9 percent in September from 6.5 percent in August.

Further, recent inflation has been considerably higher than projected and markedly above the central bank's 2 percent target.

Policymakers assessed that higher interest rates were needed to curtail inflation. However, inflation targeting should be forward-looking and flexible so that it can contribute to high and stable output and employment and to countering the build-up of financial imbalances, the bank said.

The Norwegian economy is performing well now and the unemployment rate is at its historically low level, though the labor market appears to be a little tighter than previously anticipated, the bank observed.

However, there are signs that some areas of the economy are cooling down, and prospects for lower freight and energy prices may curtail inflation, the bank said.

"The policy rate has been raised markedly over a short period, and monetary policy is beginning to have a tightening effect on the economy," Norges Bank said. "This may suggest a more gradual approach to policy rate setting."

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