Norway stands pat on interest rates, signals December hike

Norway’s central bank left interest rates on hold on Thursday, as expected, but signalled a hike was on the cards for December.

The Bank’s Monetary Policy and Financial Stability Committee was unanimous in deciding to keep the policy rate at 4.25%.

It said in a statement: "Persistently high inflation imposes substantial costs on society. The longer inflation remains high, the more costly subsequent disinflation may prove to be. On the other hand, the Committee does not want to raise the policy rate more than is necessary to bring inflation back to target within a reasonable horizon.

"Monetary policy is now having a tightening effect on the economy, and the full effects of the past rate hikes are yet to be seen. In the Committee’s assessment, the policy rate is likely close to the level needed to tackle inflation, which provides the Committee with a little more time to assess whether there is a need to raise the policy rate further."

Governor Ida Wolden Bache added: "Based on the Committee’s current assessment of the outlook, the policy rate will likely be raised in December.

"The Committee will have received more information about the inflation outlook ahead of its monetary policy meeting in December. If the Committee becomes more assured that underlying inflation is on the decline, the policy rate may be kept on hold."

Bradley Saunders, assistant economist at Capital Economics, said the decision to keep the rate on hold likely signals the end of Norges Bank’s tightening cycle.

"Contrary to the Bank’s communication, we do not expect a hike in December given that inflationary pressures should continue to ease. Instead, we think rates will stay at their current levels until the middle of next year," he said.