Incremental Size of Norwegian Rate Hike Reduced but Normalization Process Not Over
November 3, 2022
The Bank of Norway’s policy interest rate had been slashed early in 2020 from 1.50% to zero percent, where such remained from May of that year until a 25-basis point increase in September 2021. Two more 25-bp increases were done in September and December of last year, and with inflation intensifying, a trio of 50-basis point moves were engineered in quick succession this year in June, August and September. Analysts had projected today’s review to impose a fourth 50-basis point increase, but the Monetary Policy Committee instead reverted to a 25-basis point hike to 2.75%. That’s still 25 basis points shy of the 3.0% pre-pandemic level, and a released statement says that another increase is likely at the final policy review of 2022 next month. CPI inflation was at 4.1% (well above the 2% target) when officials began rate normalization and had reached a 36-year high one year later. A released statement concedes some surprise at how tight the labor market became and how high inflation has risen but also notes “signs that some areas of the economy are cooling down and prospects for lower-than-expected freight and energy prices.” Touching on a theme expressed by the Fed, the statement also suggests that cumulative rate increases taken thus far may impose an increasing dampening effect on inflation and justify “a more gradual approach to policy rate setting.” But in truth, the outlook remains very uncertain and the final thought of the statement is that future policy will be dictated by evolving economic data.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Norway
ShareThis
