Norway central bank raises key rate for first time in 7 years

Source: Xinhua | 2018-09-21

Norway's central bank on Thursday decided to raise the key policy rate for the first time in seven years as the upturn in the Norwegian economy continues.

Norges Bank's Executive Board has decided to raise the key policy rate by 0.25 percentage point to 0.75 percent, the bank said in a statement.

Overall, the outlook and the balance of risks imply a gradual interest rate increase in the years ahead, the Norwegian central bank said.

If the key policy rate is kept at the current level for too long, price and wage inflation may accelerate and financial imbalances build up further. That would increase the risk of a sharp economic downturn further out, the bank said.

"The Executive Board's current assessment of the outlook and balance of risks suggests that the key policy rate will most likely be increased further in 2019 Q1," Norges Bank governor Oystein Olsen was quoted as saying.

In Norway, the key policy rate, also called the sight deposit rate, is the interest rate on bank deposits up to a quota in Norges Bank.

Changes in Norges Bank's key policy rate will normally have a strong impact on short-term money market rates and on banks' deposit and lending rates.