Norges Bank hikes rates by 50 basis points
Norway’s central bank hiked interest rates on Thursday by 50 basis points 3.75% as it looks to tackle inflation.
This marked the 11th increase since September 2021, and Norges Bank said its current assessment of the outlook and balance of risks implies the policy rate will most likely be raised further in August.
Governor Ida Wolden Bache said: "If we do not raise the policy rate, prices and wages could continue to rise rapidly and inflation become entrenched. It may then become more costly to bring inflation down again."
Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, said this won’t be the end of the tightening cycle for Norges Bank.
"We already expected the policy rate to hit 4%, above the consensus forecast, and the Bank’s new projections show that it now expects it to reach 4.25%.
"Following the publication of May’s surprisingly-strong inflation data, we flagged the possibility of the Bank hiking by more than the previously-signalled 25bp today. But we were among the majority of analysts to predict that the Bank would stick to its plan. In the event, not only did the Bank hike by 50bp, but it also issued more hawkish guidance."
He added: "Overall, today’s decision shows that policymakers can and will deviate from their guidance if justified by the data. But we doubt that there will be a big enough turnaround in inflation in the coming months to stop the Bank pressing on and raising its policy rate to 4.25%."