Norway central bank hikes interest rate

Norway’s central bank raised Thursday interest rates by half a per centage point to 1.75 per cent, and flagged another hike in September as it seeks to get surging inflation under control.

The move was double the quarter point increase that had been signalled in June, and comes after inflation accelerated to an annual rate of 6.8 per cent in July.

“A markedly higher policy rate is needed to ease the pressures in the Norwegian economy and to bring inflation down towards the target,” Norges Bank Governor Ida Wolden Bache said in a statement. Norway’s central bank targets 2.0 per cent annual inflation.

But with rises in prices becoming broader based than just volatile energy products, there have been mounting concerns that inflation could persist at higher levels than earlier expected.

“A faster rate rise now will reduce the risk of inflation becoming entrenched at a high level and the need for a sharper tightening of monetary policy further out,” the central bank statement said.

After having long kept its policy rate at zero to cushion the economic impact of the Covid-19 pandemic on the Norwegian economy, Norges Bank was one of the first Western central banks to begin raising rates last September.