Norway increases rates for third time in a year

Bloomberg

Norway’s central bank is on a lonely march towards higher interest rates, torn between an oil industry running at full speed on its home turf and slowing growth abroad.
Governor Oystein Olsen’s commitment to tightening has surprised markets with a more hawkish outlook three meetings in a row. He raised the key rate for a third time in less than a year, and signalled that another increase could come as soon as September.
The 67-year-old governor is seeking to rein in an economy that’s running near full steam amid a boom in investments in its offshore oil industry. Inflation, anemic in most of the world, is anticipated to run above the 2 percent target over the next four years as Norwegian workers manage to extract wage gains amid low unemployment.
“Norges Bank has noted that the upswing in the oil industry and spillovers into the Norwegian economy may prove to be stronger than envisaged,” said Kyrre Aamdal, a senior economist at DNB ASA. The situation is a stark contrast to other western economies where growth is slowing amid an escalating trade dispute between the US and China. Also backed by strong fiscal stimulus stemming from its amassed wealth, policy makers in Oslo are now front-loading rate increases before oil investment growth slows sharply next year.
Norges Bank raised its forecast for oil investment growth to 14 percent this year, but predicted an increase of just 1 percent in 2020 after one of the country’s biggest oil developments — the Johan Sverdrup field — is expected to come online later this year.