PARIS (MNI) – Norges Bank, Norway’s central bank, Thursday raised
its key policy rate by 25 basis points to 2.25%, citing more robust
economic activity and the likelihood that inflation will rise in the
future.
“The upturn in the Norwegian economy has gained a firm footing.
Several other central banks have raised their key rates. The
consideration of stabilizing activity and inflation somewhat further
ahead suggests that the key policy rate should be raised,” Norges
Governor Oystein Olsen said in a statement accompanying the rate
decision.
The rate increase was not a surprise, since the bank had said in
its last monetary policy report on March 16 that the rate should be
increased before the end of the first half. The market was split on
whether Norges would make the move at this meeting or wait until the
last meeting of the first half, scheduled for June 22.
The increase in April of Norway’s annual rate of consumer price
inflation to 1.3%, announced earlier this week, is likely to have tipped
the scales in favor of hiking now. Inflation had been at 1.0% in March.
Despite the relatively strong rise in inflation last month, it is
still well below the central bank’s longer-term target of 2.5%. “This
suggests that the key policy rate should be kept low,” the central bank
said.
“On the other hand, capacity utilization in the economy is rising.
There are prospects that inflation will pick up over the year ahead,” it
said.
“An overall assessment indicates that the key policy rate should be
raised now,” Olsen said. The bank repeated its assessment from March
that “the key policy rate should be raised gradually towards a more
normal level.”
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