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Economists had forecast in advance that Norges Bank would raise the key rate on Thursday, after the governor had made it clear at the previous monetary policy meeting in May.
Norges Bank has now increased its borrowing costs in three tranches after the Norwegian economy has reduced its oil deficit.
The key rate went from a record low of 0.5% to 0.75% in September, before being set at 1% in March this year. Just last month, the governor announced that the interest rate would continue to rise.
It's modest now too.
"While we are now looking at the outlook and the risk situation, the key rate will likely be further increased over the course of the year," said Governor Øystein Olsen.
At the press conference that followed the interest rate decision, Olsen said that it could be an interest rate increase as early as the month of September.
– The interest rate path is slightly improved in the short term. It is likely that the interest rate will be raised once again in September and will increase until next summer, says Olsen.
This means that the interest rate increases for you: thousands more per year
In a press release, the central bank writes that the growth of the Norwegian economy is good and believes that the use of production capacity is "slightly above normal".
At the same time, inflation in the economy slightly exceeds the inflation target, says Norges Bank.
The governor meets the interest rate – ask your questions here
Norges Bank against the current
The rising interest rates of the Norwegian central bank contrast with the projects of Øystein Olsen's colleagues in the United States and Europe.
The US central bank has taken a turn. First, raise interest rates in the market, before he has now opened the door to a reduction in interest.
Head of the rising interest rates of Danske Bank: – There are no clouds in Norway
The eurozone central bank also unveiled its interest rate plans and announced whether further action was needed if the economy did not improve.
Norges Bank's balance sheet is between a Norwegian economy where the temperature is rising and the international situation characterized by weaker growth and a trade war, which can also affect Norway.
– The recovery in the Norwegian economy appears to be slightly stronger next year than expected. For its part, the central bank has prospects for lower growth and lower interest rates.
E24 (+): The bond market is trying to tell us something
RENT DECISION: Governor Øystein Olsen explains the decision taken by the Board of Directors on interest rates on Thursday morning.
"style =" width: 100%; "aria-decriteby =" figcaption # 24644355 "/> RENT DECISION: Governor Øystein Olsen explains the decision taken by the Board of Directors on interest rates on Thursday morning.
Forecasts for Norges Bank's key rate, the "interest rate path," indicate that next year's interest rate hike will be slightly faster than expected, according to the central bank.
According to forecasts, the key rate should be around 1.75% at the end of 2022.
According to the interest rate forecast, the mortgage rate will fall from 2.6% in the first quarter of this year to 3.4% in 2022.
– In the event of a change in the economic outlook, forecasts for the key rate will also be adjusted, says the central bank.
The trade war and the fear of a tightening of stocks push US interest rates down from recession levels
Norges Bank writes that trade disputes contribute to "great uncertainty about international developments".
– Uncertainty about the effects of monetary policy talks about proceeding with caution in setting interest rates. Overall, the outlook and the risk picture indicate that the key interest rate will rise a little further, writes the central bank.
Uncertainty in the global economy
The trade war between the United States and China has recently intensified. Major economies are slowing down, especially in Europe, creating uncertainty and anxiety in the face of the recession.
Uncertainty and expectations of future interest rate cuts, for example at the US central bank, have contributed to a sharp decline in interest rates on the financial markets.
On Thursday morning, US government yields fell ten years, falling to less than 2% for the first time since November 2016, while the corresponding German rate was less than 0.3%, a record high.
The case continues under the announcement.
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