Norway central bank keeps rate on hold, may hike again

Norway’s central bank kept its policy interest rate on hold at 4.5% today, as unanimously predicted by economists in a Reuters poll, and reiterated that it may still tighten policy to contain inflation.

“It will likely be necessary to keep the policy rate elevated for a time, and we are prepared to raise the policy rate if needed to bring inflation down to target within a reasonable time horizon,” Norges Bank Governor Ida Wolden Bache said in a statement.

Norges Bank in September raised its policy interest rate by 25 basis points, the second hike in a cycle that began in May, and said it was prepared to do so again if the inflation outlook warranted it.

The board said today that conflicts in the Middle East were still creating substantial uncertainty about the inflation outlook, and that the future path of the policy rate would depend on how the economy evolved.

All 26 economists in an October 29-November 2 poll said they expected Norges Bank to keep rates on hold at 4.5% at this time, and the vast majority also predicted that the bank would make no further hikes.

“The Committee has not received information indicating that the outlook for the Norwegian economy has changed materially since its monetary policy meeting in September,” Norges Bank said in the statement.

Annual core inflation in Norway stood at 3% in September, above the central bank’s target of around 2%, supporting expectations that interest rates will stay elevated.

Norges Bank noted in its deliberations that the had crown appreciated more than expected since September and would have a dampening effect on inflation going forward, while higher-than-assumed energy prices were pulling it higher.

Sweden’s Riksbank yesterdya raised rates for the first time since 2023, hiking as expected by a quarter percentage point to 2.0%, while the European Central Bank is widely expected to tighten policy in December.

In Australia, the central bank on Tuesday raised its cash rate to an 18-year high of 4.85%, its fifth hike this year in a bid to lower inflation, while signalling that the tightening campaign may be nearing an end.