The Monetary Policy and Financial Stability Committee of Norges Bank unanimously decided to raise the base interest rate by 0,25 percentage points to 3%.
In the committee's opinion, a higher interest rate is needed to reduce inflation. Increase in prices is clearly above target. Growth Norwegian economy slows down, but activity is still high. The job market is tight, and a wage increase grows.
– There is a lot of uncertainty about the future economic development, but if things go as we think they will, in May we will raise the main interest rate again – says the president of the Central Bank, Ida Wolden Bache.
Since the previous December monetary policy report energy has dropped significantly, and the increase in consumer prices was lower than expected. On the other hand, unemployment was slightly lower than forecast, and the recovery in the Norwegian economy seems to be less pronounced than we predicted in December. Higher height wages and a weaker krone than previously estimated will help reduce price increases in the future. Therefore, the committee believes there is a need to increase the interest rate slightly more than previously estimated to bring inflation on target.
A higher interest rate may be needed to bring inflation back to target
The further course of the interest rate will depend on economic development. If the krona becomes weaker than expected or pressure in the economy continues, inflation may be needed to bring inflation back to target. higher interest rate than we currently estimate. If inflation falls faster or unemployment is higher than expected, interest rate may be lower than forecast.
Forecast main foot interest rate has been revised upwards compared to the previous monetary policy report and indicates that the key interest rate will rise to around 3,5% this summer.
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Source: Norges Bank
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