Norway raises interest rates by 25 basis points in a surprise decision

OSLO (Reuters) – Norway’s central bank raised its benchmark interest rate by 25 basis points to 4.50 percent, a surprise decision in a bid to combat persistent inflation, and said it was likely to remain at that level for some time yet.

Of 27 economists previously polled by Reuters, 15 expected interest rates to remain unchanged, while a minority of 12 respondents expected them to rise to 4.50%.

The Norwegian krone rose to 11.57 against the euro at 10.10 a.m. EDT, from 11.67 shortly before the announcement.

The central bank said last month that it was likely to raise interest rates in December, a sign that lower core inflation may change the views of central bankers responsible for monetary policy.

“We see that the economy is slowing, but inflation is still very high,” Norwegian Central Bank Governor Ida Wolden Bache said in a statement. “The interest rate increase now reduces the risk of inflation remaining high for a long period of time.” .

He added: “The key interest rate is likely to remain at 4.5% for some time.”

After peaking at 7.0% in June, Norway’s annual core inflation, which excludes energy costs, reached 5.8% in November, below the central bank’s forecast of 6.1% but still well above the 2.0% target.

Norges Bank’s next decision is expected on January 25.

The Federal Reserve yesterday kept interest rates unchanged and said the historic monetary tightening cycle was likely over, with discussion of lowering borrowing costs now “on the horizon”.

The European Central Bank is expected to keep interest rates unchanged in the decision expected today at 2.15 pm Italian time.

(Translated by Enrico Chiacovelli, Edited by Claudia Cristofori)