Norway central bank raises interest rate to 4.50%, signals further hikes possible

Key facts

• Norway's central bank raised its policy interest rate by 25 basis points to 4.50%.
• The bank indicated further rate hikes may be necessary to bring inflation down to its 2% target.
• Core inflation in Norway rose to 3.0% year-on-year in August.
• 16 out of 28 economists polled by Reuters expected the 25 basis-point hike.
• The Norwegian crown strengthened to 10.76 against the euro after the announcement.

Norway's central bank increased its key policy interest rate by 25 basis points to 4.50% on Thursday, a move anticipated by a slim majority of economists surveyed by Reuters. The decision was made in an effort to contain inflation, which, while moderating over the summer, remains above the central bank's target. Norges Bank Governor Ida Wolden Bache stated that keeping the policy rate elevated for a period will likely be necessary and that the committee is prepared to implement further increases if required to bring inflation down to the 2% target within a reasonable timeframe. The Norwegian crown saw a slight strengthening against the euro following the announcement. In August, Norway's core inflation stood at 3.0% year-on-year, below the central bank's forecast but still above its desired level. The central bank had previously raised rates by 25 basis points in May and had indicated in August that future monetary policy would be contingent on economic developments.