Terje Solsvik & Victoria Klesty

OSLO (Reuters) – Norway’s central bank said on Thursday it plans to raise its key policy interest rate next month, continuing a campaign of monetary tightening that started in September https://www.reuters.com/world/europe/norway-raises-interest-rates-says-another-hike-likely-december-2021-09-23.

As expected by economists in a Reuters poll, the Norges Bank’s monetary committee held steady at 0.25%.

“Based upon the current assessment by the committee of the outlook, balance of risk and the rate of inflation,” Governor Oeystein Olsen stated in a statement.

The Norwegian economy has rebounded strongly from the pandemic, aided by an end to lockdowns and a sharp rise in the price of oil and gas, the country’s biggest export https://www.reuters.com/article/power-prices-norway-tradefigures-idUSKBN2H50I2.

In September, Norges Bank’s Monetary Policy Committee raised interest rates by 25 basis points. It also stated that it would hike the rate by an additional year-end by another 25bps. Then there will be three further increases for 2022.

According to Capital Economics economists, the central bank will likely raise its policy rate 25 basis points in December.

They added that they expect the rate to rise once a quarter in the next year, which will bring it back to 1.50% at the end 2022 level.

Norges Bank said that there is uncertainty about the impact of higher interest rates and warrants a gradual rise.

Kjersti Haugland, chief economist at DNB Markets, stated to Reuters that this was likely to answer expectations that have been rising to a certain degree in the market recently, that there could be a rate increase of 50 basis points.

MARKED UPSWING

Norges Bank plans to release updated growth projections and announce its December rate decision. The bank raised its forecast of GDP growth in 2022 by 4.5% to 4.5%, as opposed to the 4.1% previously.

The reopening society in Norway has seen a significant upswing of the economy. Activity is now higher than it was before the pandemic. According to Norges Bank, the economic recovery is going as planned.

The report stated, “Enhanced economic activity and growing wage growth will likely increase underlying inflation. However, recent (crown-currency) appreciation may curb prices.”

While Norway was among the first developed economies to start reversing its ultra-loose pandemic policies, several others have since followed suit https://www.reuters.com/business/finance/great-central-bank-exit-begins-norway-hikes-rates-2021-09-23.

On Wednesday the U.S. Federal Reserve said it will begin trimming https://www.reuters.com/business/with-bond-buying-taper-bag-fed-turns-wary-eye-inflation-2021-11-03 its bond purchases, but neither the Fed nor the European Central Bank are expected to hike rates any time soon.

From 9.85 shortly before Norges Bank made its announcement, the crown fell to 9.87 against a euro at 0907 GMT. The crown’s strength against the euro has increased by approximately 7% over the past three months.