More Tightening at the Bank of Norway

August 18, 2022

In Norway, CPI inflation has climbed from 3.0% in July 2021 to a 34-year high of 6.8% last month. Core CPI inflation of 4.5% constitutes a record high. After the pandemic hit, officials had slashed Norway’s central bank policy rate from 1.50% to 0.50% between March and May of 2020. Rate normalization at the Bank of Norway began with a 25-basis point hike last September, followed by another 25 basis points this past March, a 50-basis point advance in June and now another 50 basis point increase that lifts the rate to 1.75% and above its pre-pandemic level. “A markedly higher policy rate is needed to ease the pressures in the Norwegian economy and to bring inflation down towards the target”, says Governor Ida Wolden Bache. The released statement concedes that inflation has lately become more widely based and has exceeded what they were anticipating around mid-year.

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