Norway Moves to Raise Rates Amid 'Too High' Inflation
Only five of 17 economists surveyed by Bloomberg expected the quarter-point move, which officials said was needed to bring inflation back to target.
- On Thursday, Norges Bank increased its key deposit rate by a quarter point to 4.25%, marking its first tightening step since 2023 and surprising most economists who anticipated no change.
- Policymakers led by Governor Ida Wolden Bache acted because "inflation is too high," citing core inflation exceeding 3% and the bank's failure to meet its 2% target since 2021.
- The Norwegian krone rose 0.6% against the euro following the announcement, while Sweden's Riksbank kept rates unchanged at 1.75% on Thursday, citing lower-than-forecast inflation outcomes.
- SB1 Markets analysts Dane Cekov and Harald Magnus Andreassen suggest another rate hike could arrive in September, with stable labor market developments making further increases this year likely.
- The decision places Norway alongside Australia at the hawkish end of advanced-economy central banks, as officials "collectively judged" immediate action necessary while regional peers in Europe remain on hold.
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"The price rise is too high and has been above the target for several years," said Ida Wolden Bache, Governor of the Norwegian Central Bank.
The Norwegian central bank raised interest rates by a quarter percentage point to 4.25 percent on Thursday. This makes Norges Bank the first central bank in Europe to raise borrowing costs since the start of the war in the Middle East. Economists had expected Norway to leave interest rates unchanged this month. However, they had anticipated an interest rate hike in June.
Norges Bank has stated in recent months that it plans to increase loan costs this year
Norway moves to raise rates amid 'too high' inflation
Norway's central bank has today raised its policy interest rate by 25 basis points to 4.25%, moving sooner than analysts in a Reuters poll had expected, to quell inflation pressure driven by strong wage growth and high energy costs.
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