Norges Bank announces surprise interest rate increase
25 June 2008
Norway's central bank surprised markets by raising interest rates by a quarter point to 5.75 percent on Wednesday and said it was ready to tighten again in 2009 to contain resurgent inflation.
The bank said Norway was entering a new phase with higher inflation and lower growth than during a five-year expansion driven by soaring prices for its oil and gas exports.
Rising inflation and tighter monetary policy have dampened strong economic growth in Norway and its neighbour Sweden.
The bank said rates would remain near current levels as long as inflation stayed around its target of 2.5 percent, but made clear it was ready to tighten again if price growth accelerated.
Core inflation, the measure targeted by the central bank, dipped to 2.3 percent in May from 2.4 percent in April, but the rate is up from 1.4 percent a year ago.
Norges Bank said underlying inflation is now "close to but somewhat higher" than the bank's target and said there were prospects that it would move up further.