Of the 20 economists surveyed, 14 predicted that Norges Bank will rise 25 basis points on June 23 at a rate of 1.00%, in line with the central bank’s own forecast, while six said an increase of 50 points at 1.25% was the most likely outcome. .
Last week, Statistics Norway also said Norges Bank is expected to rise 50 basis points this month, which would be the biggest increase since 2002.
Central banks around the world are struggling to contain price growth in the wake of the pandemic and the war in Ukraine, which led to a 75 basis point hike in the US Federal Reserve rate last week, as well as a surprise increase in the Swiss National Bank and new political tools at the ECB.
Norwegian consumer prices in May rose 5.7% year-on-year, even as the government partially capped soaring electricity bills. Core inflation, which excludes energy, came in at 3.4%, beating the central bank’s target of 2.0%.
The majority of participants in the Reuters poll now say rates will hit at least 1.50% by the end of September, more than the 1.25% forecast by the central bank in its March policy update.
Capital Economics predicted an even faster pace, arguing for a 50 basis point hike this week, 25 in August and another 25 in September, taking the key rate to 1.75%.
“Especially given rising global food prices and a weaker Norwegian (currency), imported goods inflation is expected to increase further over the coming months,” they wrote in a client post.
Additionally, Norway’s scorching labor market is also expected to translate into higher inflation in labor-intensive service industries, he said.
The policy rate is now expected to hit 2.50% in the second quarter of 2023, according to the survey, six months earlier than Norges Bank’s own March forecast.
The central bank released a business survey last week showing prospects for faster wage increases and slower overall growth as the economy hits capacity constraints.
Reporting by Gwladys Fouche and Terje Solsvik; Poll by Sarupya Ganguly in Bangalore; Editing by Ross Finley and Alison Williams