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Norges Bank, Norway’s central bank, added a half point to its key interest rate for the second time this year, lifting the rate to 1.75 percent as inflation rose to 6.8 percent in July.
It plans another increase next month. Analysts expect it to be another half-point bump, the Financial Times reported.
The bank’s inflation target rate is 2 percent.
“A markedly higher rate is needed to ease the pressures in the Norwegian economy and to bring inflation down toward the target,” Ida Bache, the bank’s governor, said in a statement announcing the increase.
The bank warned of the possibility of a harsh global economic slowdown and said the higher interest rate could chill the housing market and cut consumer spending.
The bank will add a quarter point at every meeting until its key interest rate reaches 3 percent next March, analysts at the Bank of America have predicted.
TREND FORECAST: Norway, as with much of the world, has been hit hard by the lack of rainfall and record high temperatures, which has also led to record-high electricity rates that has some politicians calling for a cut off exports of the country’s hydroelectric power. Another prime factor is the Ukraine War and the sanctions imposed on Russia by the U.S. NATO and its allies which have driven oil and gas prices higher.
With reports that a key pipeline system running oil from Kazakhstan through Russia and into Europe was damaged yesterday, Benchmark gas prices in the European Union shot up 13 percent overnight.
Making matters worse, as we go to press, Brent Crude is up 3.6 percent, selling above $100 a barrel on news that Saudi Arabia may cut back on oil output.
Therefore, the future is clear: Dragflation: Declining economic growth and rising inflation.