OSLO (Reuters) – Norway’s central bank is expected to raise its benchmark interest rate again this week and points to a continuing high cost of borrowing in the fourth quarter to combat inflation, a Reuters poll showed on Monday.
Among the 30 economists surveyed, 28 expected the Bank of Norway to rise by 50 basis points on September 22 to a rate of 2.25%, the highest level since 2011.
One forecaster said a 25 basis point increase to 2.0% was the most likely outcome, while another forecast a 75 basis point rise to 2.50%.
Central banks globally are struggling to contain inflation in the wake of the pandemic and the Ukraine war, which has led to a sharp rise in interest rates.
Consumer prices in Norway in August rose 6.5% y/y although the government partially curbed rising electricity bills. Meanwhile, core inflation, which does not include energy, was at 4.7%, well above the central bank’s target of 2.0%.
The majority of respondents to a Reuters poll now say rates will likely reach 2.75% by the end of the year, well above the 2.25% the central bank forecast in June.
The Norges Bank raised interest rates last August by 50 basis points, and said it was likely to raise again in September without indicating the size of the increase.
Handelsbanken Capital Markets expected the MPC this week to offer another 50 point increase, but said the market was pricing with a high probability of 75 point.
“Going forward, we believe Norges Bank will fully indicate that the policy rate will rise to 2.75% by the end of this year, although there is a high chance of it rising to 3.0%,” Handelsbanken said.
Last week the central bank released a business survey indicating a weaker outlook for businesses.
A Reuters poll predicted the Norges Bank would start cutting its policy rate in 2024.