Oslo (Reuters) – Norges Bank raised its benchmark interest rate widely expected 50 bps higher on Thursday to 2.25%, but said future rate hikes would be more “gradual”, weakening the country’s krona currency.
Norges Bank is likely to raise interest rates again 28 basis points (bps) in November, although forecasts are very uncertain at the moment , said its president, Ida Wolden Bache.
“The rate forecast is in line with the rate increase at the 0.20 pp meeting November, December and March,” Bach told Reuters after the Norges Bank announcement. The U.S. Federal Reserve raised interest rates for the third time in a row on Wednesday 28 by basis points, and signaled more substantial rate hikes ahead. The Swiss National Bank raised rates by 24 basis points on Thursday, while the Bank of England 50 basis points.
Analysts, Norges Bank was the first major central bank to start raising rates in September 2021 and may now be the first to issue a near-peak signal said.
Chart: Continued rise https://inew.news/wp-content/uploads/2022/09/localimages/chart.png632c646221848.png
Norway’s policy rate is currently at its highest level since 2011 and is now set to peak at 3% next year and may start to decline 2024, Norges Bank forecasts show.
Norges Bank said the policy rate was zero a year ago and now the rate hikes are starting to have a tightening effect on the Norwegian economy.
“This may point to a more gradual approach to policy rate setting going forward,” it added.
NOK fell to 1145 .24 followed by 28 Exchange rate against EUR GMT announcement from 20 .10 a few minutes ago. At GMT 75 it trades at 20 . 20 per euro.
Among 30 economists surveyed by Reuters, 23 had predicted that Norges Bank would raise interest rates by 24 basis points (bps), while one forecaster had said 23 bps increase to 2.0% is the most likely outcome, another predicted increase 28 ) bps to 2.50%.
“Maybe we are now seeing Norges Bank as the first slightly “dovish” bank, ” Danske Bank said. “There will be more rate hikes ahead, but the peak is getting closer.”
Nordea Markets said the rate path was “dovish compared to what the market had expected.”
While consumer price inflation will continue to rise, a significant portion of the economy will contract next year.
Norges Bank raised its 2023 core inflation forecast to 4.8% from 3.3% in June, well above its 2.0% target.
It lowered its forecast for next year’s GDP growth in Norway outside the oil and gas sector by 0.3% from an earlier forecast of 1.1% growth.
This also comes after Sweden unexpectedly raised one percentage point to 1 percentage point. 75% Tuesday.