Norway cenbank follows US, Swiss with rate hike

Norway’s central bank raised its key rate on Thursday, after increases in the United States and Switzerland as policymakers focus on tackling inflation despite turmoil in the global banking sector.

Norges Bank hiked its rate by 25 basis points to 3.0 percent after leaving it unchanged at its previous meeting in January.

The Monetary Policy and Financial Stability Committee “assesses that a higher policy rate is needed to curb inflation. Inflation is markedly above target,” the bank said in a statement.

The bank also hinted at another hike later in the spring.

“There is considerable uncertainty about future economic developments, but if developments turn out as we now expect, the policy rate will be raised further in May,” central bank governor Ida Wolden Bache was quoted saying in the statement.

The Norwegian hike came a day after the US Federal Reserve also hiked its rate by 25 basis points though it signalled that it may soon pause its monetary tightening campaign.

Moments before Norges Bank’s announcement, Switzerland’s National Bank, which helped oversee the recent UBS buyout of troubled Credit Suisse, lifted its key rate as expected by a hefty 50 basis points to 1.5 percent.

The Bank of England is forecast to join them later Thursday in hiking rates in the face of stubbornly-high inflation.

The collapse of three US regional banks this month has sent shockwaves across stock markets, but emergency measures by financial authorities have soothed some concerns.

The woes in the banking sector have complicated the task of central banks which must weigh between fighting inflation and avoiding steps that could spark a crisis in the banking system.

Norges Bank said it expects that its key rate will rise to “around 3.5 percent in summer.”

According to analysts at Capital Economics, the Norwegian rate is expected to “peak” at the summer target.

Norwegian inflation slowed to 6.3 percent in February from seven percent the previous month, but it remains well above the central bank’s target of “close to two percent.”

The bank noted that “growth in the Norwegian economy” was slowing, but added that “economic activity remains high.”