Norway to raise rates to highest in a decade

Bloomberg

Norway is poised to raise borrowing costs to the most in over a decade as unexpectedly rapid inflation challenges
earlier plans for more gradual increases.
The central bank will lift its key policy rate by a half-point to 1.75%, according to most economists surveyed by Bloomberg. That would be the highest since March 2012, with investors watching for hints of a matching move in September that markets are already pricing in.
A 50 basis-point hike would align the Norges Bank more closely with the aggressive steps taken by the world’s top monetary authorities to tackle soaring inflation. It also indicates heightened urgency: After raising by a half-point in June, policy makers had voiced a preference for quarter-point increases for the rest of 2022.
“We feel quite confident they’ll do 50 basis points rather than 25,” Swedbank economist Marlene Skjellet Granerud said, pointing to recent price and jobs data. “The top priority will be to fight inflation, which came in markedly above expectations in July. And when you have lower-than-anticipated unemployment on top of that, then 50 basis points should be quite certain.”
Norway was among the first rich-world nations to start raising borrowing costs last year after weathering the pandemic better than most. Inflation, however, has hit its highest level in 34 years, with an underlying gauge topping central-bank projections since April.
In Norway, the outlook for housing and spending by households — some of world’s most indebted — could still tilt policy makers towards a quarter-point hike, though a bigger step is more likely, according to DNB economist Oddmund Berg.
Debts of Norwegian households were equivalent to 241% of net disposable income last year — second only to Denmark, OECD data show.