Norway on track for March rate hike, central bank says

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People spend their day near the Central Bank of Norway building in Oslo, Norway May 31, 2017. REUTERS/Ints Kalnins

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  • Norges Bank keeps policy rate at 0.5%
  • Continues to signal a hike in March
  • Omicron will not prevent the economic upswing, says Omicron

OSLO, Jan 20 (Reuters) – Norway’s central bank said Thursday it plans to raise its key interest rate in March, continuing a tightening campaign that began last year as the economy recovered from the pandemic.

Norges Bank’s five-member monetary policy committee unanimously agreed to leave interest rates on hold at 0.5% for now, as expected in a Reuters poll of economists.

“Based on the committee’s current assessment of the outlook and risk balance, the policy rate will most likely be raised in March,” Gov. Oeystein Olsen said in a statement.

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Norges Bank last month raised its deposit rate for the second time since September and said it would raise the benchmark three more times in 2022, making it one of the most aggressive rate setters in the developed world. Continue reading

The krona weakened slightly against the euro to 9.97 at 09:11 GMT from 9.96 just before the Norges Bank announcement.

Despite a surge in coronavirus infections led by the Omicron variant, she kept the plan for further increases, underscoring the central bank’s desire to heal the fractures of a fast-growing economy.

Following the Omicron outbreak, the Norwegian government reinstated restrictions on social gatherings in restaurants and entertainment venues last month, but some of these measures have already been reversed. Continue reading

“Easing of containment measures is likely to contribute to a sustained economic recovery,” Norges Bank said, adding that underlying inflation has risen more-than-expected and is now close to the central bank’s target.

“A gradual normalization in policy rates is consistent with sustained high levels of employment. Higher interest rates will also help counteract a build-up of financial imbalances,” the central bank said.

Thursday’s rate decision should be the last to be chaired by Oeystein Olsen, who is due to retire at the end of February.

Among the favorites to succeed him are Norges Bank deputy chief Ida Wolden Bache and NATO Secretary General Jens Stoltenberg. The government is expected to announce its decision soon. Continue reading

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Reporting by Victoria Klesty, editing by Terje Solsvik and Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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