Central Bank Authorities in Norway and Turkey Hold Their Fire
January 19, 2023
Norway’s policy rate was cut from 1.5% to 0% in the early months of the pandemic and not increased until September. Another hike of 25 bps to 0.5% followed in December 2021 and six more totaling 225 basis points to 2.75% followed in 2022, including a 25-bp increase last month. Officials didn’t hike further at today’s first opportunity in 2023 but characterized their action as a pause to give time to assess the effect of tightening done so far. Moreover, indications of some easing inflation in other countries created leeway to pause. By the same token, they left the strong impression that 2.75% will not be the peak and indicated that a hike in March appears probable. Norwegian CPI inflation of 5.9% last m onth was down from 35-year high of 7.5% hit in October but triple the central bank target.
Turkish monetary policy had been recklessly loose in 2021-22. Despite a downwardly spiraling lira and CPI inflation that peaked in Turkey in October at 85.5% and was at 64% last month, Central Bank of Turkey officials slashed their key interest rate from 19.0% at the start of September 2021 to 9.0% after a 150-basis point cut in November 2022. After that most recent cut, officials said they were not planning further reduction and would count upon liraization to return inflation to 5%. That target is still a long ways away.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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