Norway Keeps Rates at 4.5 Percent, Warns of Possible Further Hikes
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MENAFNThe decision by Norges Bank came after a 0.25-percentage-point hike in September and matched market expectations. The bank did not release updated economic forecasts or interest rate projections at Thursday's interim meeting.
"Inflation is too high," Norges Bank Governor Ida Wolden Bache said in a statement.
"It will likely be necessary to keep the policy rate elevated for a time, and we are prepared to raise the policy rate if needed to bring inflation down to target," she said.
The latest decision builds on the central bank's September assessment that tighter monetary conditions were necessary to bring inflation back to its 2% target within a reasonable timeframe.
Under projections released at that meeting, inflation was expected to return to the target in 2029. Interest rates were forecast to remain close to their current levels for some time before gradually moving lower.
Despite a greater-than-expected slowdown in underlying inflation over the summer, policymakers pointed to continuing domestic price pressures, particularly those stemming from previous increases in companies' labor costs.
Rising energy and commodity prices associated with the conflict in the Middle East have added further uncertainty to the inflation outlook, pushing up operating expenses for businesses and the cost of imported goods.
However, the Norwegian krone's appreciation has provided some relief by making imports cheaper and helping contain inflationary pressures.
The central bank's September outlook also pointed to a further slowdown in economic activity alongside a moderate increase in registered unemployment.
Policymakers emphasized the challenge of maintaining sufficiently restrictive monetary conditions to curb inflation without triggering an excessive deterioration in economic activity.
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