2023-12-14 09:56:02
Oslo (awp/afp) – The Bank of Norway raised its key rate by a quarter of a point to 4.5% on Thursday but now plans a pause “for a while”.
The Norwegian central bank has decided on a fourteenth increase since September 2021 to deal with galloping inflation, at a time when the main Western central banks are taking a break on rates.
The Bank of Norway had warned in November that a further turn of the screw would be likely but in the meantime, the slowdown in Norwegian economic activity had wrongly led economists to think that such an increase would not take place.
“We see that the economy is cooling, but inflation remains too high,” justified the governor of the Bank of Norway, Ida Wolden Bache, in a press release.
“An increase in the policy rate reduces the risk that inflation will remain high for a long period. The policy rate will likely be kept at 4.5% for some time,” she added.
Nordea bank economists saw in the Norwegian decision “a more aggressive line” (“hawkish”) than expected.
In the third quarter, the Scandinavian country’s gross domestic product (GDP) posted a very modest increase of 0.1% while business surveys indicate a deterioration in the situation. And housing construction came to a screeching halt.
Inflation slowed more quickly than expected: it rose to 5.8% over one year in November, well beyond the monetary policy objective of around 2% but 0.3 points. below central bank forecasts.
“The future development of the Norwegian economy is uncertain. If cost inflation remains high or the krona turns out to be weaker than expected, price inflation might remain higher for longer than expected currently,” noted the central bank.
The Bank of Norway’s decision comes as the US Fed decided on Wednesday to leave rates unchanged while acknowledging that it had started discussing a timetable for rate cuts.
afp/ck
1702553645
#Bank #Norway #raises #key #rate #pause #December
