The Norwegian national bank has raised the interest rate once again with future economic developments remaining uncertain.
ADVERTISEMENTNorway's central bank has once again raised its key interest rate, from 4.25% to 4.5% for the the fourteenth time in two years.
Norges Bank said in an announcement that the 0.25% increase is necessary to mitigate the risk of prolonged high inflation.
“We see that the economy is cooling down, but inflation is still too high. An increase in the policy rate now reduces the risk of inflation remaining high for a long period of time,” said Norges Bank governor, Ida Wolden Bache.
Bache said it is likely that the policy rate will remain at 4.5% “for some time ahead.”
The bank said that although inflation has been lower than anticipated, it has remained notably above the 2% mark. According to the bank, the depreciation of Norway's currency, will keep inflation at “elevated levels.”
At the same time, there has been a significant increase in business expenses in recent years, indicating the potential for substantial wage growth, while unemployment rates remain low.
The bank's forecast indicates that the policy rate will stay around 4.5% until autumn 2024, unless price inflation stays higher for longer than currently projected. If that happens, there could be another increase in the interest rate.
“The committee assesses that a tight monetary policy stance will likely be needed for some time ahead in order to return inflation to target within a reasonable time horizon,” a statement said.
“When inflation falls back and economic conditions so warrant, the Committee can start lowering the policy rate.”
