OSLO: Norway’s central bank said Thursday that it was raising its key interest rate by a quarter-point to 3.25 percent to dampen inflation and warned that it would probably increase the rate again in June.
The inflation rate, which stood at 6.5 percent in March, “is high and markedly above the target of 2 percent”, the bank said in a statement, adding that despite a slowing of growth, economic “activity remains high”.
“The labour market is tight, and wage growth is set to be higher in 2023 than last year,” it added.
Thursday’s increase, which was widely expected, brings the rate to its highest level since 2009.
After five consecutive increases, the central bank paused its hikes in February amid signs the economy was slowing because of the monetary tightening, before resuming again in March.
At the time, it predicted that the interest rate would be around 3.5 percent by summer.
“The policy rate will most likely be raised further in June,” the bank said Thursday, noting uncertainty over economic developments.
“If the krone remains weaker than projected or pressures in the economy persist, a higher policy rate than envisaged earlier may be needed,” central bank governor Ida Wolden Bache said in the statement.
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