By Victoria Klesty
OSLO (Reuters) – Norway’s central kept its key policy rate unchanged at 2.75% on Thursday, as expected by a majority of economists surveyed by Reuters, and said it aimed for a hike in March.
Of the 26 economists polled in advance, 15 had anticipated an unchanged rate on Thursday while 11 had bet on an increase of 25 basis points (bps).
“The future policy rate path will depend on economic developments. The policy rate will most likely be raised in March,” Norges Bank Governor Ida Wolden Bache said in a statement.
While some factors suggested a rate hike could be made already in January, there were also reasons to hold off for the time being, the central bank said.
Core inflation, running at 5.8% in December, was “markedly above” Norges Bank’s goal of 2.0%, and the labour market remains tight, the policy committee said.
On the other hand, inflation was weakening household purchasing power, while many companies expect a fall in activity in the time ahead, it added.
“The outlook for the Norwegian economy is more uncertain than normal,” Norges Bank said.
The Norwegian currency, the crown, strengthened to 10.708 against the euro at 0915 GMT from 10.737 just before the rate announcement.
Global energy prices have eased more than had been expected, and global inflationary pressures appeared to be easing, the central bank said.
“The policy rate has been raised considerably over a short period of time, and monetary policy has started to have a tightening effect on the economy. This may suggest a more gradual approach to policy rate setting,” it added.
In December, Norges Bank said it would “most likely” hike again in the first quarter of 2023 and that the rate would stay around 3% for the year.
Thursday’s statement was in line with this view, analysts at Capital Economics (CE) said.
“The bank signalled that it will raise its policy rate at the next meeting in March. We suspect that will be the final hike in this tightening cycle, and that the Bank will leave the policy rate at 3% until next year,” CE said in a note.
(Reporting by Victoria Klesty, editing by Terje Solsvik, Gwladys Fouche and Angus MacSwan)
