As expected by most analysts, the Central Bank of Norway‘s Executive Board decided Wednesday to increase the key policy rate by 0.25 percentage point to 2 per cent. But it might be the last rate hike for a while.
“Inflation has moved in line with projections and growth in the Norwegian economy appears to have picked up as anticipated. This suggests that the interest rate should be raised further towards a more normal level,” Governor Svein Gjedrem says in a statement.
Underlying inflation is now around 2 per cent and is likely to edge down further in the period to summer.
“As the activity level increases and the effects of the krone appreciation unwind, inflation is expected to move up again” says the Governor.
The global economy is rebounding. Oil prices and other commodity prices have increased. A loan agreement between Greece, euro area countries and the IMF has been concluded, but government securities markets remain turbulent.
Developments in Europe may prove to be weaker than expected, which may also affect the outlook for the Norwegian economy.
“The Executive Board therefore considered the alternative of leaving the key policy rate unchanged at this meeting,” says Governor Svein Gjedrem.
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