© Reuters. FILE PHOTO: A general view of the Norwegian central bank, where Norway’s sovereign wealth fund is situated, in Oslo, Norway, March 6, 2018. REUTERS/Gwladys Fouche
OSLO (Reuters) – Norway’s central bank will keep its benchmark interest rate on hold next week at 0.75% while confirming plans for a hike in June, a Reuters poll showed on Wednesday.
Norges Bank said last month it would raise rates this year and next at a faster pace than previously intended to keep a lid on inflation and a rapidly growing economy.
Norwegian headline inflation accelerated to 4.5% year-on-year in March although the core component was up a more modest 2.1%, slightly exceeding the central bank’s long-term goal of 2%.
Registered unemployment meanwhile stands at just 2.0%, the lowest since the 2008-2009 financial crisis.
Norges Bank has forecast seven more rate hikes by the end of 2023, which would lift the policy rate to 2.5%.
“We expect early and substantial Norges rate hikes to mean that wage growth peaks this year and unemployment rises gradually in 2023,” BofA Global Research said in a note to clients.
BofA predicted the key policy rate would rise to 2.25% in 2023, slightly less than indicated by the central bank.
“We assume that the early and aggressive Norges Bank action in tightening monetary policy will keep inflation on a gradual downward trajectory through 2023,” BofA said.
The Reuters poll, conducted April 20-25, showed 18 of 21 economists expected rates to stay on hold when the Monetary Policy Committee’s decision is announced on May 5.
Three participants predicted Norges Bank would hike rates next week by a quarter percentage point.
In late June, when the next decision is due, the policy rate is expected to hit 1.0%, the vast majority of analysts predicted.
Next week’s meeting of the MPC is an intermediate one, meaning Norges Bank will not provide detailed economic forecasts, but will, instead, give a written assessment on progress since March.
Updated forecasts are due for release in June.
Norway’s central bank to hold rates next week, raise in June- Reuters poll