Norges Bank Hikes Rate By 50 Bps; Signals Gradual Tightening
Norway’s central bank again raised its interest rate on Thursday but signaled a more gradual approach to further tightening.
The Monetary Policy and Financial Stability Committee unanimously decided to raise the policy rate by 50 basis points to 2.25 percent, the highest since late 2011.
The bank has started to lift the interest rate in October 2021 from zero percent to the current 2.25 percent to curb the runaway inflation.
The bank today hinted at another rate hike in November but suggested that its tightening may be nearing an end.
Governor Ida Wolden Bache said the monetary policy is starting to have a tightening effect on the Norwegian economy.
“We do not know with certainty what the peak policy rate will be, but we believe we are approaching that level,” the governor said. This may imply a more gradual approach to policy rate setting ahead.
The projections in policy report are based on a rise in the policy rate to around 3 percent in the course of winter.
The governor said inflation is likely to remain high for longer than projected earlier. The rate hike is intended to bring inflation down.
Many will be facing a squeeze on finances given the rapid rise in prices at the same time as the policy rate is being raised, Bache said. But a faster rate rise now reduces the risk of inflation becoming entrenched at a high level and thereby the need for a sharper tightening of monetary policy further out.
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