MNI BRIEF: Norges Bank Hikes 50 bps, Backs Faster Tightening

The Norges Bank hiked its benchmark rate by 50 basis points to 1.75 percent at its August meeting, as expected by many, stating that another rise was likely next month, making the case for accelerated near-term tightening to try and stop high inflation getting entrenched and to avoid sharper tightening further down the line.

In its June forecasts the Norwegian central bank's Monetary Policy and Financial Stability Committee projected a 25 bps hike in August with the policy rate peaking round 3% in mid 2023 but a “ markedly higher policy rate is needed to ease the pressures in the Norwegian economy," Governor Ida Wolden Bache stated Thursday.

In its brief analysis the committee highlighted the latest spike in inflation stating that "The rise in prices has been broad-based in recent months and may entail that inflation will remain high for longer than expected" adding that "A faster rate rise now will reduce .. the need for a sharper tightening of monetary policy further out."