Terje Solsvik, Victoria Klesty

OSLO (Reuters – Norway’s central bank increased its benchmark rate Thursday, as expected. However, it said that more increases were possible next year. This would be dependent on the effects of a rise in coronavirus infection and the emergence Omicron variant.

The monetary committee at Norges Bank raised the sight deposit interest rate from 0.25% to 0.50%. This is in line with the plan of the central bank and 20 out 22 economists who were polled.

The economic effects of the pandemic remain uncertain. However, if the economic development is broadly consistent with projections, then the policy rate will likely be increased in March,” Oeystein Olsen (Norges Bank Governor) stated in a statement.

Norway’s crown currency, which was 10.20 against the euro just prior to Norges Bank’s announcement, has been firmed at 9.32 GMT to 10.14.

It was noted that the bank had already discussed with the Bank the possible economic consequences of the pandemic.

It said that if additional restrictions are necessary and result in reduced economic activity during spring next year, further rate increases may be delayed.

Norway’s economy is recovering this year, and Norges Bank was one of the first central banks in the world to raise rates after the outbreak of the pandemic.

The government tightened its restrictions on Omicron spreading Monday, and announced a partial lockdown. This included the ban on alcohol being served in restaurants or bars for four weeks.

The bank said it was also concerned by a potentially higher-than-projected rise in domestic wages and prices caused by capacity constraints and persistent global price pressures.

It stated that “if there is a likelihood of persistently high inflation the policy rate could be increased more quickly.”

Norway has reduced interest rates three times by 2020, in an effort to mitigate the effects of the COVID-19 pandemic. The result was a boom of housing prices due to cheap credit.