Norway's central bank raises key policy interest rate

COPENHAGEN, Denmark (AP) — Norway’s central bank on Thursday raised its key policy interest rate from 0.25% to 0.5%, citing the upswing in the economy that it said was likely to continue.

If the growth continues, the bank is expected to make more rate increases next year, officials said.

“There is considerable uncertainty about the evolution of the pandemic and its effects on the economy. But if economic developments evolve broadly in line with the projections, the policy rate will most likely be raised in March,” Norges Bank Governor Oeystein Olsen said.

It comes as consumer prices rose 5.1% over the past year, according to Statistics Norway.

Olsen noted that in recent weeks, the number of new COVID-19 infections and hospitalizations have reached a new peak since the beginning of the pandemic. That, along with restrictions to curb the spread of the virus, were expected to hurt economic activity in the short term, Olsen said.

“When infection rates subside further out and containment measures are eased, the economic upswing will likely continue,” he said. “Rising wage growth and higher imported goods inflation is expected to push up underlying inflation ahead.”

The interest rate increase, which takes effect Friday, comes the same day other central banks — including the European Central Bank and Bank of England — issue decisions amid high inflation and worries about the new omicron variant of the virus.

Oil-rich Norway is not part of the European Union, though it has a close economic relationship with the bloc.