Norway’s central bank announces double interest rate hike
The key policy rate in Norway will be raised by 0.5 percentage points to 3.75 percent to try and curb inflation, Norges Bank announced Thursday.
The central bank, Norges Bank, will bring the key policy rate in Norway to its highest level since 2008 with the double rate hike to 3.75 percent.
Norway’s central bank has been using interest rate increases to curb inflation.
“If we do not raise the interest rate, prices and wages can continue to rise rapidly, and inflation will take hold. Then it can be more expensive to bring price inflation down again,” central bank governor Ida Wolden Bache said.
Inflation is currently well above the central bank’s initial target of two percent.
Norges Bank said that it would next decide on interest rates in August. During the autumn, the key policy rate could peak at 4.25 percent. Prior to the announcement, analysts were split on whether the key policy rate would be hiked by 0.5 percentage points or 0.25 percentage points.
Higher interest rates are also considered a tonic for Norway’s struggling krone. One of the factors behind the weak krone, according to experts, is lower interest rates in Norway than elsewhere.
The latest hike now brings Norwegian interest rates above the key policy rate in Sweden (3.5 percent) and the European Central Bank (3.5 percent). However, the US key policy rate is still considerably higher (5-5.25).
After the hike was announced, the Norwegian krone strengthened against the euro and dollar. While the news is good for the krone, the Homeowners Association has said that interest rate hikes are pushing consumers to the limit.
"There are many indications that we are approaching the breaking point for many people's household finances. Therefore, Norges Bank must now proceed cautiously," Carsten Henrik Pihl from the homeowners association told Norwegian newswire NTB.
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The central bank, Norges Bank, will bring the key policy rate in Norway to its highest level since 2008 with the double rate hike to 3.75 percent.
Norway’s central bank has been using interest rate increases to curb inflation.
“If we do not raise the interest rate, prices and wages can continue to rise rapidly, and inflation will take hold. Then it can be more expensive to bring price inflation down again,” central bank governor Ida Wolden Bache said.
Inflation is currently well above the central bank’s initial target of two percent.
Norges Bank said that it would next decide on interest rates in August. During the autumn, the key policy rate could peak at 4.25 percent. Prior to the announcement, analysts were split on whether the key policy rate would be hiked by 0.5 percentage points or 0.25 percentage points.
Higher interest rates are also considered a tonic for Norway’s struggling krone. One of the factors behind the weak krone, according to experts, is lower interest rates in Norway than elsewhere.
The latest hike now brings Norwegian interest rates above the key policy rate in Sweden (3.5 percent) and the European Central Bank (3.5 percent). However, the US key policy rate is still considerably higher (5-5.25).
After the hike was announced, the Norwegian krone strengthened against the euro and dollar. While the news is good for the krone, the Homeowners Association has said that interest rate hikes are pushing consumers to the limit.
"There are many indications that we are approaching the breaking point for many people's household finances. Therefore, Norges Bank must now proceed cautiously," Carsten Henrik Pihl from the homeowners association told Norwegian newswire NTB.
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