Norway central bank hikes rate by 25 basis points, will likely hike again

Norway's central bank raised its benchmark interest rate by 25 basis points (bps) to 2.75% on Thursday, as expected by economists surveyed by Reuters, and said it will likely hike again as inflation remains above its targets.

Norway's central bank raised its benchmark interest rate by 25 basis points (bps) to 2.75% on Thursday, as expected by economists surveyed by Reuters, and said it will likely hike again as inflation remains above its targets. Of the 24 analysts polled in advance, all but one had anticipated a hike of 25 bps at Thursday's meeting, while one had bet on an unchanged rate.

"The policy rate will most likely be raised further in the first quarter of next year," Norges Bank said in a statement. The Norwegian currency, the crown, strengthened to 10.43 against the euro at 0904 GMT from 10.44 just before the rate announcement.

The U.S. Federal Reserve on Wednesday raised its key policy rate

by 50 basis points and said it will deliver more interest rate hikes next year even as the economy slips towards a possible recession. "The forecasts for the Norwegian economy are more uncertain than normal, but if the economy evolves as anticipated, the policy rate will be around 3% next year", Norges Bank Governor Ida Wolden Bache said in a statement.

Norway's core inflation has outpaced the central bank's most recent forecasts, hitting 5.9% in October year-on-year and slowing somewhat to 5.7% in November while the bank had projected 5% for each of the two months. Norges Bank, which targets core inflation of 2.0% over time, on Thursday raised its 2023 core inflation forecast to 5.2% from 4.8% seen in September.