Norway hikes rate by 50 basis points, will likely raise again in Nov

A view shows the building of Norway’s central bank (Norges Bank) in Oslo, Norway, June 23, 2022. REUTERS/Victoria Klesty

OSLO  –Norway‘s central bank raised its benchmark interest rate by 50 basis points on Thursday, as expected by most economists, and said it plans to hike again in November.

Norges Bank’s monetary policy committee raised the sight deposit rate to 2.25 percent from 1.75 percent, having signaled in August a September hike was likely, but without indicating by how much.

The hike comes as central banks across the world battle to contain soaring inflation.

“The policy rate will most likely be raised further in November,” the bank said in a statement.

The rate, now at the highest level since 2011, is set to increase to around 3 percent during the upcoming winter, the bank said, adding that projections were more “uncertain than normal”.

Of the 30 economists polled by Reuters, 28 predicted Norges Bank would hike by 50 basis points (bps) while one forecaster had said a 25 bps increase to 2 percent was the most likely outcome, and another predicted a rise of 75 bps to 2.5 percent.

The Norwegian crown fell to 10.24 against the euro at 0808 GMT from 10.20 just before the rate announcement.

Norges Bank’s move comes after the U.S. central bank lifted rates by a third-straight 75 bps on Wednesday and signaled more large increases to come, and neighbor Sweden’s unexpected full percentage point hike to 1.75 percent on Tuesday.

The Swiss central bank on Thursday hiked by 75 bps, while the Bank of England is expected to raise rates later in the day.

Norway‘s August consumer prices rose 6.5 percent year-on-year even though the government has partly capped soaring electricity bills.

Meanwhile, core inflation, which excludes energy, stood at 4.7 percent, exceeding the central bank’s goal of 2 percent.