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Norway Is Seen Leading the Way in Post-Covid Interest Rate Hikes


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Norway Is Seen Leading the Way in Post-Covid Interest Rate Hikes

Business

Category: Accounting / Financial

Norway’s central bank said it may be able to raise interest rates earlier than previously thought, reinforcing the view it will be the first among holders of the world’s major currencies to tighten policy as the economy recovers.

Keeping the benchmark rate at 0% as expected, policy makers said Thursday that their latest forecast implies a “gradual rise from the first half of 2022 as activity approaches a normal level” after the pandemic. The krone gained as much as 0.8% against the euro.

The outlook stands out among the world’s key central banks from the U.S. to Japan, which are all expected to maintain ultra-loose policies for years to support their pandemic-stricken economies.

Norway, by contrast, has relied more heavily on fiscal measures to weather the crisis better than most. This year, it withdrew record amounts from its $1.2 trillion sovereign wealth fund, the world’s biggest, easing pressure on the central bank.

Kristoffer Kjaer Lomholt, a chief analyst at Danske Bank who had expected policy makers to raise rates by December 2021, said his call “seems even more likely now” after Thursday’s announcement.

What Bloomberg Economics Says…

“Abundant fiscal support to households and businesses will help Norway bounce back from the Covid-19 recession. We expect the central bank, which also takes financial stability into account, will be able to raise rates already in the first quarter of 2022 — sooner than flagged today.”

— Johanna Jeansson, Nordic economist

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Source: Bloomberg

Published: June 30, 2022