BRUSSELS (MNI) – The Norges Bank raised its key policy rate 25
basis points to 2.0% on Wednesday and said it will continue to gradually
raise rates to a more normal level.
“Inflation has moved in line with projections and growth in the
Norwegian economy appears to have picked up as anticipated. This
suggests that the interest rate should be raised further towards a more
normal level,” the central bank’s Governor Svein Gjedrem said in a
statement.
The central bank began hiking rates last year, from an all-time low
of 1.25%, as its economy had weathered the financial crisis better than
most.
In a statement accompanying its decision on Wednesday, Norway’s
central bank said it will leave rates in the interval 1.5% – 2.5% until
its next monetary policy report on June 23, 2010 and will hike gradually
after that.
“On balance, prospects and the risk outlook suggest that the key
policy rate should be raised at this meeting. As an alternative, the
Board considered leaving the key policy rate unchanged,” the Norges Bank
said in a statement on its web site.
It said growth in Norway was in line with the projections in its
March monetary policy report but that inflation was likely to edge down
further than it had previously expected because of the strong krone.
“Underlying inflation is now around 2% and is likely to edge down
further in the period to summer owing to the krone appreciation over the
past year,” the central bank said in a statement on its website.
“So far in the second quarter the krone exchange rate has been 0.8
per cent stronger than projected in the March Monetary Policy Report,”
it said.
“As capacity utilisation increases and the effects of the krone
appreciation unwind, consumer price inflation is projected to gradually
move up again,” the central bank said.
The central bank targets an inflation rate of 2.5%.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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