Norway Signals Earlier Tightening in Bet Inflation Will Recover

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Norway Signals Earlier Tightening in Bet Inflation Will Recover


Category: Business News

Norway’s central bank indicated it could raise interest rates sooner than earlier anticipated after taking stock of the country’s improved economic outlook and growing signs of tightening by its counterparts around the world.

 Despite inflation remaining well below target, Norges Bank kept its key policy rate at 0.50 percent (where it’s been since March 2016) while revising up the rate path. After removing its easing bias in June, the bank’s rate path now indicates a small chance for a rate hike in 2018 versus early 2019 earlier.
The krone strengthened on the news and was 0.4 percent higher at 9.317 per euro as of 11:19 a.m.Central bank Governor Oystein Olsen clarified the bank’s quest toward higher rates at the follow up press conference. “I want to underscore that the rate path is little changed from earlier,” he said. “Rates will most probably remain at today’s level for the time ahead. We can also put it differently: a good while ahead. Given that things develop like we predict we will be well into 2019 before the first rate increase comes.”

The decision comes as the European Central Bank and policy makers from Stockholm to Washington prepare to gradually unwind the record stimulus put in place after the financial crisis. Backed by its massive oil wealth and fiscal stimulus, Norway has been able to resort to less drastic monetary stimulus even as it also battled a crash in its oil industry.

 The economy of western Europe’s biggest crude exporter is strengthening as it emerges from the oil slump that started in 2014. The central bank’s key regional network survey suggested in September that businesses are the most upbeat since before the crisis, although a slowdown in the housing market is cooling near-term expectations.

See forecasts from Norges Bank here.

Regardless of what the ECB decides at its October meeting, Norway’s policy makers are unlikely to move fast ahead with higher rates. Core inflation has fallen to well below the central bank’s 2.5 percent target, coming in at 0.9 percent in August. They are also wary of stoking further gains in the krone, which has risen about 3.7 percent since a low in May.

Source: Bloomberg