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Norway central bank hikes interest rate

Norway's central bank raised Thursday interest rates by half a percentage point to 1.75 percent, and flagged another hike in September as it seeks to get surging inflation under control.

FILE PHOTO: Norway’s central bank (Norges Bank) Governor Ida Wolden Bache looks on, following a news conference at the bank’s headquarters in Oslo, Norway June 23, 2022. REUTERS/Victoria Klesty

Norway’s central bank raised Thursday interest rates by half a percentage point to 1.75 percent, and flagged another hike in September as it seeks to get surging inflation under control.

The move was double the quarter point increase that had been signalled in June, and comes after inflation accelerated to an annual rate of 6.8 percent in July.

“A markedly higher policy rate is needed to ease the pressures in the Norwegian economy and to bring inflation down towards the target,” Norges Bank Governor Ida Wolden Bache said in a statement.

Norway’s central bank targets 2.0 percent annual inflation.

But with rises in prices becoming broader based than just volatile energy products, there have been mounting concerns that inflation could persist at higher levels than earlier expected.

“A faster rate rise now will reduce the risk of inflation becoming entrenched at a high level and the need for a sharper tightening of monetary policy further out,” the central bank statement said.

After having long kept its policy rate at zero to cushion the economic impact of the Covid-19 pandemic on the Norwegian economy, Norges Bank was one of the first Western central banks to begin raising rates last September.

Thursday’s increase was the fifth in the past year, and the second in a row of a half percentage point, instead of the usual quarter-point moves.

Data also released Thursday by the national statistics office showed the Norwegian economy, excluding the offshore oil and shipping sectors, bounced back into growth with a 0.7 percent expansion in the April-June period.

The country’s economy contracted by 0.6 percent in the first quarter of the year.

The Norwegian government expects the nation’s economy will grow by a vigorous 3.6 percent this year.

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