Sweden’s central bank surprises by raising interest rates by a full percentage

Norway raises interest rates by 50 basis points and looks forward to smaller increases in the future

Written by Victoria Klesty

OSLO (Reuters) – Norway’s central bank raised its benchmark interest rate by 50 basis points to 2.25% on Thursday, as most economists expected, but said future increases would be more “gradual”, weakening the coronary currency.

The Bank of Norway said it is likely to rise again in November, but expectations of its price trajectory point to a smaller increase, economists said.

The Central Bank’s Monetary Policy Committee raised the interest rate on demand deposits to 2.25% from 1.75%, after it indicated in August the possibility of raising rates in September, but without indicating how much of the rise.

The increase comes as central banks around the world struggle to contain spiraling inflation.

“It is likely that the interest rate will be raised further in November,” the bank said in a statement.

The rate, now at its highest since 2011, is set to rise to around 3% over the next winter, the bank said, adding that the outlook is “more uncertain than usual”.

The Norges Bank said the policy rate was zero a year ago, and the increases are now beginning to affect the Norwegian economy.

“This may indicate a more incremental approach to policy rate setting in the future,” she added.

The Norwegian krone fell to 10.23 against the euro at 0828 GMT from 10.20 just before the rate was announced.

“The latest trajectory of interest rates is pointing to a 25 basis point rise, which is on the cautious side of what markets had previously expected,” Nordea Markets said in a note to clients.

READ ALSO :   Malaysia says 2023 economic growth will be lower than 2022

Of the 30 economists polled by Reuters, 28 expected the Bank of Norway to rise 50 basis points while one forecaster said a 25 basis point increase to 2.0% was the most likely outcome, and another forecast a 75 basis point rise to 2.50%.

Norges Bank’s move comes after the US central bank raised interest rates by 75 basis points in a row on Wednesday and signaled more big increases to come, and comes on the heels of Sweden’s unexpected full rise of 1 percentage point to 1.75% on Tuesday.

The Swiss central bank rose 75 basis points on Thursday, while the Bank of England is expected to raise interest rates later in the day.

Consumer prices in Norway in August rose 6.5% y/y although the government partially curbed rising electricity bills. Core inflation, which does not include energy, was 4.7%, well above the central bank’s target of 2.0%.

Newsletter Updates

Enter your email address below to subscribe to our newsletter