Norway keeps interest rates on hold, eyes December hike
By Terje Solsvik
OSLO (Reuters) — Norway's central bank kept its benchmark interest rate unchanged at 4.25% on Thursday, as widely expected, and said it would likely raise the cost of borrowing next month unless inflation showed a continued decline.
All 29 economists polled in advance by Reuters had expected rates to stay on hold on Thursday but were divided over whether the bank would hike to 4.50% in December.
«Based on the committee's current assessment of the outlook, the policy rate will likely be raised in December,» Norges Bank Governor Ida Wolden Bache said in a statement.
«If the committee becomes more assured that underlying inflation is on the decline, the policy rate may be kept on hold,» she added.
The crown strengthened to 11.81 against the euro at 0915 GMT, from 11.83 just before the announcement.
«Norges Bank still warns it will hike in December, though it has become more uncertain,» Nordea Markets analysts said in a note. «We believe interest rates will be kept on hold due to lower inflation figures than Norges Bank estimates.»
Norwegian consumer prices have fallen faster than expected in recent months, below the central bank's forecasts as well as those of analysts, but they still exceed the official 2.0% inflation target.
Headline annual inflation stood at 3.3% in September, down from 4.8% in August and below Norges Bank's forecast of 4.2%.
Core inflation, which excludes energy costs and changes in taxation, stood at 5.7% in September, below a central bank prediction of 6.2% and down for a third straight month since hitting a record in June of 7.0%.
«The labour market is still tight, but pressures in the Norwegian economy are easing. Inflation is markedly above the 2% target. Consumer price inflation
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