–Adds quotes, details to story sent at 13:15 GMT
FRANKFURT (MNI) – Norway’s central bank, the Norges Bank, announced
Wednesday that it has decided to keep its key policy rate unchanged at
2%, but it signaled an accelerated trend of rate increases in the months
ahead, barring unexpected negative surprises in the economy.
The bank’s executive board, while keeping the rate unchanged for
now, set its eyes on a more aggressive tightening path. It said the rate
should be in a range of 1.75% to 2.75% between now and its next monetary
policy report on June 22, “unless the Norwegian economy is exposed to
new major shocks.”
That was higher than the 1.5%-2.5% range it had published in its
last monetary policy report in October and repeated after its last rate
setting meeting January 26.
“The Executive Board’s current assessment is that the key policy
rate should be increased before the end of the first half-year of 2011,”
the bank said in a press release.
“The upturn in the Norwegian economy has gained a firm footing and
market interest rates abroad have risen,” it wrote.
“There are prospects of relatively high growth in output and
employment in the years ahead. Inflation is projected to gradually pick
up towards the target of 2.5 per cent,” it added.
“The projections in the March 2011 Monetary Policy Report imply
that the interest rate should gradually be raised towards a more normal
level,” Deputy Governor Jan F. Qvigstad noted.
“The consideration of guarding against the risk of future financial
imbalances that may disturb activity and inflation somewhat further
ahead suggests that the key policy rate should be increased in the near
term,” the bank also said.
The bank sounded upbeat on Norwegian growth, noting prospects for
“fairly strong growth.” The bank also predicted that the economy “will
reach normal capacity utilisation somewhat earlier than projected in the
October [monetary policy] Report.”
Cutting the other way, “the krone is strong and prices for imported
consumer goods have fallen at a slightly faster pace than projected in
October,” the bank said. “Underlying inflation is about 1.25% and there
are prospects that inflation will remain low in the coming quarters.”
Looking ahead, the bank foresees cost inflation ticking upward,
“but at the same time high net inward migration will in isolation have a
dampening impact on wage growth.”
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