Norway’s central bank on Thursday lifted interest rates by 50 basis points and said a further hike may be needed in the near term.
On a busy day for central banks, the Norges Bank boosted its policy rate to 3.75%. Markets had been divided between expectations for hikes of either 25 or 50 basis point hikes.
“The Committee’s current assessment of the outlook and balance of risks implies that the policy rate will most likely be raised further in August,” Norges Bank said in a statement on its website.
The Norwegian krone
USDNOK,
climbed 1.3% to 10.25 krone against the dollar.
The central bank is hemmed in by sticky inflation, with core inflation climbing to 6.7% in May from 6.5% in April, defying expectations for a gain of just 6.3%, according to analysts polled by Bloomberg News. Indeed, the central bank said inflation is “markedly above the target,” with international interest rates rising more than anticipated, and higher wage growth and a weaker krone than projected previously set to drive up inflation.
“If we do not raise the policy rate, prices and wages could continue to rise rapidly and inflation become entrenched. It may then become more costly to bring inflation down again,” said Governor Ida Wolden Bache.
Norges Bank said the effects of past rate hikes are not evident, with the effects on household consumption from those and higher inflation also an unknown right now. Thursday’s hike marks the third this year for 100 basis points in total.
The Swiss National Bank also hiked interest rates on Thursday, with decisions from the Bank of England and Turkey’s central bank also ahead.
