Norway's central bank hikes interest rates again

Norway's central bank hiked rates again on Thursday, as it looked to combat inflation.

Norges Bank lifted the benchmark interest rate by 25 basis points to 4.5% and said the rate will likely be kept at that level "for some time ahead". Most analysts had been expecting no change.

Governor Ida Wolden Bache said: "We see that the economy is cooling down, but inflation is still too high. An increase in the policy rate now reduces the risk of inflation remaining high for a long period of time."

The Bank said that while inflation has been somewhat lower than expected it is still "markedly above" the 2% target.

Annual core inflation was 5.8% in November.

"At the same time, business costs have increased considerably over the past few years, and there are prospects for continued high wage growth," Norges said. "The krone has depreciated further. This will keep inflation elevated ahead despite an easing of international price impulses. Employment is high, and unemployment remains low."

Capital Economics said the latest decision to hike rates marks the end of Norges Bank’s tightening cycle.

"Looking ahead, we have pencilled in a faster pace of rate cuts next year than policymakers currently anticipate as we expect a weak economy and stronger krone to weigh on price pressures," said assistant economist Bradley Saunders.

"While recent signs of weaker price pressures and dovish turns taken by central bankers in other major economies will have played on policymakers’ minds, continued high wage growth and a weak krone tipped the balance in favour of further tightening."