Hike rates

Norway to hike rates by 50 basis points this week – Reuters poll

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  • 28 out of 30 economists see a 50 basis point hike to 2.25% on September 22
  • The rate would be the highest since 2011
  • Core inflation in Norway exceeds central bank target

OSLO, Sept 19 (Reuters) – Norway’s central bank is expected to raise its benchmark interest rate again this week and signal a continued rise in the cost of borrowing in the fourth quarter to fight inflation, a poll shows. Reuters published on Monday.

Of the 30 economists surveyed, 28 predicted that Norges Bank will rise 50 basis points (bps) on September 22 at a rate of 2.25%, the highest level since 2011.

One forecaster said a 25 basis point increase to 2.0% was the most likely outcome, while another predicted a 75 basis point increase to 2.50%.

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Central banks around the world are struggling to contain inflation in the wake of the pandemic and the war in Ukraine, leading to steep rate hikes. Read more

Norwegian consumer prices in August rose 6.5% year-on-year, even as the government partially capped soaring electricity bills. Core inflation, which excludes energy, came in at 4.7%, beating the central bank’s 2.0% target.

A majority of Reuters poll participants now say rates are likely to hit 2.75% by the end of the year, well above the 2.25% projected by the central bank in June. Read more

Norges Bank last raised rates in August, by 50 basis points, and said it would likely rise again in September without indicating the extent of the increase.

Handelsbanken Capital Markets predicted this week’s monetary policy committee would offer another 50 point hike, but said the market was pricing a high probability of 75 points.

“Later, we believe that Norges Bank will fully indicate that the key rate will be raised to 2.75% by the end of this year, although there is a good chance that it will reach 3.0%” , said Handelsbanken.

The central bank released a business survey last week pointing to a weaker outlook for businesses.

The Reuters poll predicted that Norges Bank could start cutting its key rate in 2024.

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Reporting by Terje Solsvik; Poll by Susobhan Sarkar in Bangalore; Editing by Jan Harvey

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