Norway: Norges Bank hikes the key policy rate in June
The executive board of Norges Bank voted unanimously to raise the sight deposit rate to 1.25% from 1.00% at its monetary policy meeting on 19 June, as had been widely expected by market analysts. This represents the third increase in the key policy rate in less than 12 months, specifically since September 2018.
June’s monetary policy decision came against a backdrop of persistently high inflationary pressures. Although inflation fell to 2.5% in May from 2.9% in April, it remained above Norges Bank’s target rate of 2.0% for the sixteenth month running. Moreover, with economic growth seen powering ahead this year and rising wages likely to stoke inflationary pressures, Norges Bank raised interest rates to help bring future inflation closer to target.
Commenting on the implications of June’s outturn, James Smith, economist at ING, one of our panelists, said:
“Probably the biggest news is that the Central Bank thinks it will ‘most likely’ hike again over the course of 2019, having previously seen the next move around the first quarter of 2020. That follows a better-than-expected reading from the latest oil investment survey for 2019 spending […] We expect the Central Bank to hike rates again in December, although as ever a lot will depend on how trade tensions evolve.” Other panelists of FocusEconomics, such as Credit Suisse, take a similar view.
The next monetary policy decision will be taken on 15 August.