Norges Bank ups interest rate
By Abigail Townsend
Date: Thursday 23 Mar 2023
(Sharecast News) - Norway's central bank raised interest rates on Thursday and signalled further possible hikes as it looks to rein in inflation.
Norges Bank increased its benchmark interest rate by 25 basis points to 3.0%, in line with expectations.
The bank also said it would likely increase them again in May, with the cost of borrowing now on track to reach 3.5% by the summer.
In a statement, governor Ida Wolden Bache said: "There is considerable uncertainty about future economy developments, but if we developments turn out as we now expect, the policy rate will be raised further in May."
The bank added that the higher rate was needed to curb inflation. Core inflation in the Nordic country, which strips out more volatile energy prices, was 5.9% in February, although that is down from a peak of 6.4% in January.
TD Securities said: "As universally expected, Norges Bank stuck to its guidance and raised its policy rate. However, the decision was undoubtedly hawkish.
"The bank also revised up its policy rate path significantly, and now expects a peak of 3.6% in the fourth quarter, about 0.5 percentage points above the peak in the December 2022 projection, which the shift being driven mostly by domestic demand, the exchange rate and external factors."
TD Securities now expects Norges Bank to deliver 25bps increases in both May and June, with another potential 25bps jump in August if core inflation remains strong and the currency weak.
As at 1000 GMT, the Norwegian krone was trading nearly 1% lower against the euro at 11.2629.
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