OSLO – The Norwegian central bank left its key interest rate unchanged on Thursday, but said that rates are likely to rise in March next year.
“The outlook and the balance of risks imply a gradual interest rate increase in the years ahead,” the Norges Bank said.
In a slightly dovish twist, it said that “the fall in oil prices and weaker global growth prospects imply a slightly slower rate rise than in the September Report.”
In September, Norway’s central bank had raised the key interest rate for the first time in more than seven years, bringing it to 0.75 percent from 0.5 percent.
The Norwegian krone appreciated versus the euro following the Norges Bank’s decision, which precedes the European Central Bank’s monetary policy announcements at 12.45 and a press conference by ECB president Mario Draghi at 13.30.
The ECB is widely expected to stop net purchases in its roughly $3 trillion bond-buying program at the end of this month, but signals that interest rates will remain at record lows “at least through the summer of 2019.”
Inflation in Norway is running above the Norges Bank’s 2 percent target, while business surveys point to solid economic growth.
Norway’s headline inflation rate hit 3.5 percent in November, the highest level in about two years, while the CPI-ATE measure of underlying inflation, which excludes energy prices and tax changes, registered 2.2 percent in annual terms.
“The Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased in March 2019,” said Governor Oystein Olsen.