Norges Bank Lifts Key Rate, Sees a Further Raise in December

Norges Bank on Thursday became the first major central bank to raise interest rates after the Covid-19 pandemic, lifting its key rate to 0.25% from zero while suggesting a further raise later this year.

The raise marks the first move since the Norwegian central bank cut it to zero in May last year as the pandemic took hold.

"A normalizing economy now suggests that it is appropriate to begin a gradual normalization of the policy rate," Governor Oystein Olsen said, while also noting the bank wanted to counter the buildup of financial imbalances created by low rates.

"Based on the Committee's current assessment of the outlook and balance of risks, the policy rate will most likely be raised further in December," he said.

The central bank said the reopening of society has led to a marked upswing in the Norwegian economy, and activity is now higher than its pre-pandemic level.

The bank also raised its rate path given higher capacity utilization and inflation prospects, driven by a weaker krone and higher wage growth projections.

The new rate path implies that the policy rate will rise slightly faster and end at a slightly higher level than previously projected, with a policy rate of 1.7% seen toward the end of 2024.

Write to Dominic Chopping at

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  09-23-21 0439ET
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