By Victoria Klesty
OSLO (Reuters) – Norway’s central bank raised its benchmark interest rate by 25 basis points to 4.50% in a surprise decision on Thursday as it sought to combat persistent inflation, and said it would likely stay put at that level for some time ahead.
Of the 27 economists polled in advance by Reuters, 15 had expected rates to stay on hold on Thursday while a minority of 12 had forecast a hike to 4.50%.
The Norwegian crown strengthened to 11.57 against the euro at 0910 GMT, from 11.67 just before the announcement.
The central bank had said last month it would likely raise the cost of borrowing in December with the caveat that a decline in core inflation could change its monetary policy makers’ minds.
“We see that the economy is cooling down, but inflation is still too high.
An increase in the policy rate now reduces the risk of inflation remaining high for a long period of time,” Norges Bank Governor Ida Wolden Bache said in a statement.
“The policy rate will likely be kept at 4.5% for some time ahead,” she added.
Having peaked at 7.0% in June, Norway’s annual core inflation, which excludes energy costs, stood at 5.8% in November, below the central bank’s forecast of 6.1% but still far above the 2.0% target.
Norges Bank’s next policy decision is due on Jan.
25.
The Federal Reserve left interest rates unchanged on Wednesday and said the historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming “into view.”
The European Central Bank is expected to keep rates on hold later on Thursday.
(Reporting by Victoria Klesty, editing by Terje Solsvik)
