Norway raises rates despite "solid" economic growth

The Norwegian central bank has increased borrowing costs thanks to an economy which, she says, is growing at a "steady pace" and has maintained its position for a second increase in the second half of this year.

Norges Bank announced Thursday that it raised its key rate by 0.25 point to 1%. This decision, which is not surprising since the central bank had announced earlier, caused a rise of 1.1% of the crown against the euro. One euro bought NKR 9.6052 at the start of trading on Thursday.

The recovery in the Norwegian economy appears to be stronger than expected, the central bank said. "On the other hand, there are prospects for weaker growth and lower interest rates abroad," he added.

This sounds bold on the part of the Norwegian central bank, as many of its neighbors and trading partners have adopted a more moderate stance on borrowing costs in a downturn. Norway's big neighbor, Sweden, has recently struggled with four months of negative interest rates. He avoided a recession with a surprisingly robust 1.2% rise in the fourth quarter, following a contraction of 0.2% in the third quarter.

"The key interest rate forecasts point to a slightly faster rate hike in 2019 and a slightly lower rate than predicted in the previous report," said Norges Bank.

"With this change in the key rate, inflation should be close to the target in the coming years, while unemployment remains low. The trajectory of the key rates will be adjusted according to the evolution of the economic outlook. "

Governor Oystein Olsen said: "Our current badessment of the outlook and balance of risks suggests that the key rate will probably be further increased in the next six months."

At its January meeting, the central bank said, leaving its key rate unchanged at 0.75%, that "the outlook and the table of risks indicate a gradual increase in the key rate, which should most likely increase in March 2019 "

Since December, Norwegian economic statistics have revealed positive surprises, said badysts at Barclays Research, who expected the central bank to raise the key rate. They add that "inflation has slightly surprised upward, oil prices are firmer and the Norwegian krone is a little weaker".