Oslo – Norway’s central bank, Norges Bank, announced a 25‑basis‑point increase to its policy interest rate, bringing it to 4.50% on Thursday. The move follows a narrow majority of analysts in a Reuters poll who expected the hike.

Governor Bache Stresses Need for Vigilance

Governor Ida Wolden Bache said the bank will likely keep the policy rate elevated for some time and is prepared to raise it further if necessary to bring inflation down to the 2% target within a reasonable horizon. “It will likely be necessary to keep the policy rate elevated for a time, and the committee is prepared to raise the policy rate further if needed to bring inflation down to the 2% target within a reasonable time horizon,” Bache said in the official statement.

Market Reaction

Following the announcement, the Norwegian crown strengthened modestly, trading at 10.76 per euro at 0806 GMT, compared with 10.79 just before the decision.

Recent Monetary‑Policy Context

Earlier this year, Norges Bank raised rates by 25 basis points in May, moving ahead of many forecasts. In August, the bank cautioned that future policy direction would depend on evolving economic conditions, leaving some uncertainty about the path forward.

Poll Insight

The September 17‑21 Reuters poll surveyed 28 economists. Sixteen predicted a 25‑basis‑point increase to 4.50%, while twelve expected no change at that time. Seven economists foresaw a similar hike later in the fourth quarter, and the majority viewed 4.50% as the likely peak borrowing cost.

Inflation Outlook

Core inflation in Norway rose to 3.0% year‑on‑year in August, slightly below the bank’s own 12‑month forecast of 3.3% but still above the 2% target. Governor Bache noted that underlying inflation moderated over the summer and was lower than expected, though the longer‑term outlook had not shifted materially.

Implications for the Economy

The rate increase reflects the bank’s commitment to anchoring inflation expectations and preserving price stability. By keeping borrowing costs higher, the central bank aims to temper demand pressures without derailing economic growth.

Analysts will continue to monitor upcoming data releases, including wage growth and consumer spending, to gauge whether further policy tightening will be required.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.