Norway’s central bank raised interest rates for the first time in a year, and signaled a series of increases to limit inflation as an economic recovery gathers pace in the world’s second-richest country per capita.
The overnight deposit rate was raised by a quarter of a percentage point to 2.25 percent, the Oslo-based bank said today. The decision was expected by 15 of the 20 economists surveyed by Bloomberg. The bank reiterated a forecast calling for two more quarter point increases this year.
“The upturn in the Norwegian economy has gained a firm footing,” Governor Oeystein Olsen said in the statement. “Several other central banks have raised their key rates. The consideration of stabilizing activity and inflation somewhat further ahead suggests that the key policy rate should be raised.”
Olsen is trying to steer a consumer-driven recovery in seventh-largest oil exporter as unemployment has dipped below 3 percent, pushing up credit growth and fueling property prices. Inflation, which has been below the central bank’s 2.5 percent target since July 2009, accelerated to a nine-month high in April.
The krone traded 0.3 percent higher against the euro at 7.8033 at 2:08 p.m. in Oslo. Against the dollar, the krone was up 0.2 percent at 5.5076.
The bank, which expects to lift its benchmark to an average of 4.75 percent by 2014, shelved a series increases in May last year on concern Europe’s debt crisis would stifle exports. Since then, a commodity price boom has spurred inflation, forcing banks from Asia to Europe to raise rates.
The European Central Bank and policy makers in Sweden, the Philippines, Malaysia and India all tightened policy in the past two months. ECB President Jean-Claude Trichet said this week central bankers are united in fighting inflation.
“Other central banks have started hiking rates giving Norges Bank more room to maneuver because the rate differentials which would put an upward pressure on the currency is becoming less,” said Gizem Kara, an economist at BNP Paribas SA, by phone from London. She predicts two more increases this year, with the next coming in September.
Norway’s underlying inflation, which excludes energy costs and taxes, last month exceeded Norges Bank’s estimate of 0.9 percent, picking up to 1.3 percent in April.
A report earlier this week showed Norwegian credit growth accelerated to 6.3 percent in March, the highest since July 2009, as consumers take advantage of low borrowing costs. Surveyed unemployment fell to 3.1 percent in February, the lowest in 19 months, also helping to fuel spending and demand in the economy. Registered unemployment was 2.8 percent in April.
The bank, which in 2009 became the first in Europe to tighten policy as the financial crisis eased, has held rates over the past year in part to limit gains in the krone and help exporters. The krone this month rose to the highest in 33 months against the dollar as oil prices rallied following unrest in North Africa and the Middle East.
Deputy Governor Jan F. Qvigstad signaled in March that efforts to limit currency gains will play a smaller role in shaping policy. The krone “is strong, but we are not worried especially,” he said in a March 16 interview. Since then, the krone has strengthened 2.6 percent against the dollar and 0.8 percent against the euro.
Norway’s mainland economy, which excludes oil, gas and shipping, will expand 3.25 percent this year and 3.75 percent in 2012 as export demand picks up, the central bank estimates.
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