Norges Bank Adopts Cautious Stance To Rates, Sees Next Hike In Q1 2019
September 20 2018 - 6:04AM
RTTF2
Norway's central bank adopted a cautious approach to policy
tightening and hinted that the key interest rate would be hiked
further in the first quarter of next year, after raising rates for
the first time since 2011, on Thursday.
The Executive Board decided to raise the key policy rate by a
quarter-point to 0.75 percent, the Norges Bank said in a statement.
The decision was in line with economists' expectations.
"The Executive Board's current assessment of the outlook and
balance of risks suggests that the key policy rate will most likely
be increased further in 2019 Q1", Norges Bank Governor Oystein
Olsen said.
The previous change in the rate was a quarter-point reduction in
March 2016.
In June last year, the bank shed its downward bias for its
interest rate path and predicted in May this year that the rate
will be hiked after summer.
The outlook and the balance of risks imply a gradual interest
rate increase in the years ahead, the Norges Bank said. If the key
policy rate is kept at the current level for too long, price and
wage inflation may accelerate and financial imbalances build up
further, the bank added.
The bank expressed worry that this would increase the risk of a
sharp economic downturn.
"Uncertainty surrounding the effects of higher interest rates
suggests a cautious approach to interest rate setting," the bank
said.
Inflation is projected to remain close to the target for some
years and unemployment is seen to remain low.
ING Bank economist Jonas Goltermann predicted two policy rate
hikes in 2019, starting March.
The high level of debt among Norwegian households could be
preventing the bank from adopting an aggressive stance, the
economist said.
That said, once the uncertainty regarding higher rates clear and
concerns over the US-China trade war fades, the bank may be open to
a more aggressive stance, Goltermann said.
Further, if the krone does not strengthen as much as expected,
then that may also support the case for tighter policy, he
added.
The next policy decision is scheduled to be announced on October
25.
US Dollar vs CHF (FX:USDCHF)
Forex Chart
From Mar 2024 to Apr 2024
US Dollar vs CHF (FX:USDCHF)
Forex Chart
From Apr 2023 to Apr 2024