Hawkish Norway to press on with rate hikes after August pause
Defying a global economic slowdown, Norway is headed for its fastest expansion in seven years in 2019 thanks to an investment boom in its oil and gas industry, and rising government spending.
As a poll of economists showed, Norway's central bank is expected to keep interest rates on hold on Aug. 15, while signaling that a hike will likely follow later this year amid solid growth, above-target inflation, and currency weakness. The survey of 31 economists taken on Aug. 7-9 unanimously predicted Norway's policy rate would stay at 1.25% at this week's board meeting.
A change in rates at the August meeting would have been unusual. While Norges Bank reviews monetary policy eight times per year, it only revises economic forecasts four times, in March, June, September, and December. Any changes to interest rates usually coincide with the latter meetings.
Before Norges Bank has raised rates three times since September and warned that further hikes might follow next month and in the first half of 2020, even as other central banks shifted to dovish positions.
The Norwegian economy is set to grow by 2.5% this year, the most rapid expansion since 2012, according to a June forecast by Statistics Norway. Core inflation in July stood at 2.2% year-on-year, exceeding the central bank's target of 2.0%.
Of the 29 economists who gave longer-term forecasts, a narrow majority of 15 predicted that rates would rise by a quarter percentage point in September, while seven said a hike would probably come in the fourth quarter instead.