Norway raises interest rate by 50 bp, biggest hike in 20 years

By Ovunc Kutlu

ANKARA (AA) – Norway's central bank on Thursday raised its interest rate by 50 basis points, marking the biggest single rate hike since 2002, as economies around the world try to cope with high inflation.

Norges Bank said its Monetary Policy and Financial Stability Committee unanimously decided to raise the policy rate to 1.25% from 0.75%.

The policy rate "will most likely be" raised further to 1.5% in August, Norges Bank Governor Ida Wolden Bache said in a statement.

"Prospects for a more prolonged period of high inflation suggest a faster rise in the policy rate than projected earlier. A faster rate rise now will reduce the risk of inflation remaining high and the need for a sharper tightening of monetary policy further out," she explained.

Consumer inflation in Norway rose 5.7% in May, from the same month a year ago, recording the highest annual gain since December 1988, the country's government agency Statistics Norway announced on June 17.

Norges Bank warned that rapid interest rate increases abroad will lead to an "abrupt" slowdown in economic growth, and added rise in interest rates in Norway may also cool down the housing market and curb household consumption.