Norway central bank raises interest rate, may hike again

Norway's central bank raised its policy ​interest rate by 25 ‌basis points ​to 4.50% on Thursday, seeking to contain inflation, as expected by a narrow majority of analysts in a Reuters poll, ‌and said it may hike again.

"It will likely be necessary to keep the policy rate elevated for a time, and the committee is prepared to raise the policy rate further if needed ‌to bring inflation down to the 2% target within a reasonable time horizon," Norges ‌Bank Governor Ida Wolden Bache said in a statement. The Norwegian crown strengthened to 10.76 against the euro at 0806 GMT, from 10.79 just before the announcement.

Norway's central bank raised rates by 25 basis points ⁠in May, moving ​sooner than most ⁠analysts had expected, but said in August that the future path of monetary policy would "depend on economic developments", ⁠casting some doubt on the way forward. Among the 28 economists in the September 17-21 poll, 16 expected ​Norges Bank to announce a 25 basis-point hike to 4.50%on Thursday, while 12 ⁠predicted no change at this time.

A further seven economists predicted that a hike to 4.50% would come in ⁠the ​fourth quarter, and the vast majority of the economists polled predicted 4.50% to be the peak borrowing cost. The Nordic country's core inflation rose to 3.0% year-on-year in ⁠August, below Norges Bank's official forecast of 3.3% for the 12-month period but still remaining above ⁠the central bank's target.

"Over ⁠the summer, underlying inflation moderated and was lower than expected. But the inflation outlook somewhat further ahead does not appear to have ‌changed materially," ‌Bache said in the statement.