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Norges Bank, the central bank of Norway, added a quarter-point to its benchmark interest rate last week, after raising the rate by a half-point in September.
The bank set the new rate a day after the U.S. Federal Reserve raised its key rate by three-quarters of a point.
“Economic activity is high in Norway and unemployment is at a historically low level,” bank governor Ida Bache said in a statement announcing the new rate.
“Inflation has continued to edge higher and is markedly above our target of 2 percent,” she noted.
However, the rate increase is only half the size of the previous one because “some areas of the economy are cooling down and prospects for lower-than-expected freight and energy prices may curb inflation,” the bank noted in a brief statement.
The central bank “has marked a shift toward more moderate rate hikes…and will use the time to assess the effects of the hikes already delivered,” analysts at Finland’s Nordea Bank wrote in a note.
TRENDPOST: More than a year ago, Norway was among the first major economies to lift its interest rate in response to inflation, as we noted in “Norway Becomes First “Group of 10” Country to Raise Interest Rates” (28 Sep 2021).
Norway has now become the first to lower its key rate.
If Norway can be seen as a bellwether and the same time scales apply, the U.S. Federal Reserve could be expected to lower its interest rate early next summer and Europe some time late in summer.
However, the rising economic stormwinds are blowing stronger across Europe and the U.S., which could indicate lower rates sooner if recessions engulf Western economies in the near term.