Norway\u2019s central bank became one of the first to raise interest rates as a result of the Middle East conflict, warning that the conflict in the Middle East had lifted inflationary pressures as well as heightened economic uncertainty.<\/p>\n\n\n\n
Meanwhile, the Swedish central bank, the Riksbank, kept its key rate unchanged and said that while the risk of higher inflation had increased somewhat due to the war in the Middle East, it could wait on developments before adjusting its policy.<\/p>\n\n\n\n
On Thursday, Norway\u2019s Norges Bank increased its policy rate by 0.25 percentage points to 4.25 %, following the lead of Australia among advanced economy central banks in raising rates.<\/p>\n\n\n\n
The move was sooner than most analysts in a Reuters poll had expected.<\/p>\n\n\n\n
The rich Scandinavian country is western Europe\u2019s largest petroleum producer and has struggled to get inflation down to the central bank\u2019s 2% target despite cutting interest rates far less in recent years than the European Central Bank, US Federal Reserve or Sweden\u2019s Riksbank, which on Thursday held its own rates unchanged.<\/p>\n\n\n\n
\u201cThe war in the Middle East is still causing substantial uncertainty about the economic outlook,\u201d said Ida Wolden Bache, Norges Bank\u2019s governor. She added: \u201cInflation is too high and has run above target for several years.\u201d<\/p>\n\n\n\n
Norway’s annual core inflation rate came in at 3.0% in March, slightly lower than forecast but well above the central bank’s target of 2.0%.
Norges Bank said that the Iran conflict meant \u201cexternal price pressures appear to be slightly stronger\u201d than in March, but that the recent appreciation in the krone should damp imported inflation.<\/p>\n\n\n\n
It warned that if war in the Middle East changed the economic outlook, it would be forced to revise its rate forecast.<\/p>\n\n\n\n
Norges Bank estimated in March that mainland GDP in Norway \u2014 stripping out the effects of oil and gas \u2014 would increase by 1.6% this year, lower than in 2025.<\/p>\n\n\n\n
A majority \u200cof respondents, 15 of the 23 economists in a Reuters poll conducted ahead of the announcement, had said Norges Bank would keep the policy rate \u2060on hold today, while the remaining eight expected a 25-basis-point hike.<\/p>\n\n\n\n
The Norwegian crown strengthened to 10.85 against the euro by 0948 GMT, from 10.92 just before the announcement.<\/p>\n\n\n\n
The bank\u2019s statement points to a further rate hike this year, Sparebank 1 Chief Economist Elisabeth Holvik said.<\/p>\n\n\n\n
\u201cNorges Bank will raise borrowing costs again after the summer, so that the policy rate reaches 4.5% by year-end,\u201d Holvik said.<\/p>\n\n\n\n
For its part, Sweden’s central bank earlier on Thursday kept its policy rate unchanged at 1.75%, as expected, but said the risk that the war in the Middle East will lead to higher inflation had increased somewhat.<\/p>\n\n\n\n
The Riksbank has been in wait-and-see mode since cutting interest rates by a quarter percentage point in September last year, according to Reuters.<\/p>\n\n\n\n
\u201cThere is scope to wait until there is a clearer picture of the effects of the war and the supply shocks it entails,\u201d the central bank said in a statement.<\/p>\n\n\n\n
In Poland, the central bank Governor Adam Glapinski said the likelihood of interest rate increases has grown over the past month although a hike is not a forgone conclusion for policymakers.<\/p>\n\n\n\n
\u201cRate hikes are likely but they may not occur,\u201d Glapinski told a news conference on Thursday. On the other hand, \u201crate cuts are very unlikely.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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