Norway keeps interest rates on hold, eyes December hike

Norway's central bank kept its benchmark interest rate unchanged at 4.25% on Thursday, as widely expected, and said it would likely raise the cost of borrowing next month unless inflation showed a continued decline.

Norway's central bank kept its benchmark interest rate unchanged at 4.25% on Thursday, as widely expected, and said it would likely raise the cost of borrowing next month unless inflation showed a continued decline. All 29 economists polled in advance by Reuters had expected rates to stay on hold on Thursday but were divided over whether Norges Bank would hike to 4.50% in December.

"Based on the committee's current assessment of the outlook, the policy rate will likely be raised in December," Norges Bank Governor Ida Wolden Bache said in a statement. "If the committee becomes more assured that underlying inflation is on the decline, the policy rate may be kept on hold," she added.

The crown traded at around 11.83 against the euro at 0904 GMT, largely unchanged from before the announcement. Norwegian consumer prices have

fallen faster than expected in recent months, below the central bank's forecasts as well as those of analysts, but they still exceed the official 2.0% inflation target.

Headline inflation stood at 3.3% year-on-year in September, down from 4.8% year-on-year in August, as food and energy costs fell, and was well below Norges Bank's forecast of 4.2%. Cone inflation, which excludes energy costs and changes in taxation, stood at 5.7% in September, below a central bank prediction of 6.2% and down for a third straight month since hitting a record in June of 7.0%.