(Bloomberg) — Norway’s central bank raised its key interest rate to the highest level since 2009 and signaled further tightening after higher price pressure from a weaker-than-forecast krone outweighed concerns about global banking turbulence.
(Bloomberg) — Norway’s central bank raised its key interest rate to the highest level since 2009 and signaled further tightening after higher price pressure from a weaker-than-forecast krone outweighed concerns about global banking turbulence.
Norges Bank lifted its benchmark deposit rate on Thursday by 25 basis points to 3%, as forecast by all analysts in a Bloomberg survey. It said the rate will rise to about 3.5% in the summer.
“There is considerable uncertainty about future economic developments, but if developments turn out as we now expect, the policy rate will be raised further in May,” said Governor Ida Wolden Bache. Policymakers cited higher wage growth and a weaker krone pushing up inflation ahead.
The krone strengthened 0.6% against the euro to 11.293 at 10:17 a.m. in the Norwegian capital.
Norway’s currency, the worst performer among the Group of 10 most-traded global currencies this year, combined with an economy that’s continued to exceed expectations have fueled bets that Norway’s policymakers will prolong their rate-hiking campaign as price and wage pressures remain high.
The decision was “hawkish” with a “firm signal of more hikes to come,” said Kristoffer Kjaer Lomholt, head of FX and corporate research at Danske Bank A/S. The new top-point of 3.6% in the rate path and the verbal guidance point to 25 basis-point hikes in May and June and a roughly 40% probability of a final 25 basis-point hike in September,” he said.
Norges Bank was the first among major currency holders to start raising rates in September 2021. Uncertainty regarding its decision has been heightened by financial-market disruption in the wake of US bank failures and the takeover of Credit Suisse Group AG. The move follows a quarter-point hike by the Federal Reserve on Wednesday while the Swiss National Bank raised by 50 basis points earlier on Thursday.
The 3.6% peak in the Norwegian central bank’s new rate path compares with a 3.1% projection from December.
–With assistance from Joel Rinneby.
(Updates with quote from governor, krone, analyst comment from third paragraph)
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