OSLO (dpa-AFX) – In the fight against high inflation, the Norwegian central bank has increased its key interest rate sharply, as expected. The key interest rate will rise by 0.5 percentage points to 1.75 percent, as the Norges Bank announced in Oslo on Thursday. Economists had counted on it. It’s the fifth rate hike since the beginning of the pandemic and the second significant rate hike in a row. In the pandemic, the policy rate was cut to zero in May 2020.
The key interest rate is currently as high as it was last in March 2012. Another hike in interest rates is highly likely in September, the central bankers continued. The background to this is that prices in Norway are currently rising as strongly as they were last 34 years ago, although the Norges Bank was one of the first central banks in the industrialized countries to brace itself against high inflation by raising interest rates.
“The rise in prices has been broad-based in recent months,” the central bankers continued. This could result in inflation staying high for longer than previously expected. This scenario, in turn, points to a faster increase in the key interest rate than was forecast in June.
Most recently, a number of Western central banks raised interest rates in response to the high inflationary pressure. The European Central Bank also started its rate hike cycle, but only in July. The war in Ukraine and the harsh corona policy in China led to global supply chain bottlenecks and rising energy and raw material prices. The prices for many industrial primary products also rose significantly.
The Norwegian krone recently increased somewhat after the decision. Norwegian government bond yields edged up.
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