June 27, 2022
Norway’s central bank announced a 50-basis-point increase in its benchmark interest rate, the country’s largest single increase since 2002.
The policy rate has been raised from 0.75 percent to 1.25 percent, with Norges Bank Governor Ida Wolden Bache predicting that it will be raised to 1.5 percent in August.
The bank’s Monetary Policy and Financial Stability Committee voted unanimously in favor of the rate hike, which was twice as high as economists had predicted.
In a statement, the committee stated that a “significantly higher” policy rate is required to stabilize inflation around the Norges Bank’s target of close to 2%. In April, Norwegian consumer price inflation reached a 13-year high of 5.4 percent year on year, far exceeding expectations.
The committee expressed concern about inflation rising faster than expected against a backdrop of “little spare capacity in the Norwegian economy,” as well as sustained global inflationary pressures and a weak Norwegian krone.
The terminal rate is expected to rise to around 3%.
Source:CNBC
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