As expected, Norges Bank maintains a record low, zero interest rate. The head of the central bank warns that the interest rate will most likely increase in September.
- Now when we assess the outlook and the risk picture, the key interest rate will most likely be raised in September, says Øystein Olsen.
There is general agreement among experts that today's rate meeting is interest rates will not affect the basic interest rate. At the same time, tensions were related to the moment when Norges Bank would signal another rate increase.
Since May last year, the main interest rate has remained at record low level of zero percent.
In today's report, Norges Bank reiterates that the prospects and the risk picture still "point to the continuation of expansionary monetary policy."
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Norges Bank stresses that economic activity has picked up after a sharp decline last spring, and the rate of vaccination has picked up over the course of this spring.
"There is still uncertainty about the further course of the pandemic, but economic activity now seems to be clearly accelerating and slightly faster than previously estimated." The central bank informs.
Probable increase in interest rates in September. Uncertainty about inflation
Norges Bank also notes that core inflation is currently below the 2% target.
"Higher price inflation and higher inflation expectations internationally add to uncertainty about future price developments." Reports Norges Bank.
- We are aware of this, and this is a topic in the international arena in central banks and financial markets - explains the president of the central bank at today's press conference.
However, the stronger koruna combined with the prospects for moderate wage growth indicate that Norwegian inflation will remain below the target "over the next few years," writes the central bank. The risk that inflation will be low is limited as long as the capacity utilization continues to grow, stresses the central bank.
- Inflation data are a bit on the low side and like many other central banks' assessments, we believe that some signs of rising inflation we need to ignore, as long as these are temporary things, Olsen said at a press conference.
In its assessment, the Interest Rate Committee also emphasized that low interest rates reduce the risk of remaining high unemployment and are conducive to inflation returning to the target.
The committee's assessment also took into account that house prices have increased significantly since the pandemic last spring, but also notes that "growth has slowed down somewhat recently".
Fresh forecasts
Along with today's decision on interest rates, there is also a recent monetary policy report with forecasts for the economy and interest rates.
When was the last time Norges Bank published interest rate forecasts, predicted that the policy rate would "most likely" be raised in the second half of the year if the economy shows clear signs of improvement.
