Norges Bank lifted its policy rate a quarter point to 4.50% and said it is prepared to go further. Of 28 economists polled before the decision, 12 had expected no change.
Norway's central bank got better inflation news this summer than it had planned for. It raised interest rates anyway.
On Thursday, Norges Bank took its policy rate from 4.25% to 4.50%. The move followed a core inflation reading of 3.0% for August. That was below the 3.3% the bank itself had projected, though still well above its 2% target.
Governor Ida Wolden Bache made clear the bank was looking past a single soft reading. "It will likely be necessary to keep the policy rate elevated for a time, and the committee is prepared to raise the policy rate further if needed to bring inflation down to the 2% target within a reasonable time horizon," she said. The bank said underlying inflation had eased over the summer but that the broader outlook "does not appear to have changed materially."
Its own forecasts explain the urgency. The bank projects inflation will not start declining until 2027 and will reach 2% only in 2029. Along the way, it sees growth slowing and joblessness edging past where it stood before the pandemic.
The call was closer than the bank's tone suggested. In a poll of 28 economists taken to , 16 expected the increase and 12 expected the rate to stay put. Most of them viewed 4.50% as the top of the cycle. The governor's statement left room for more.
A euro bought 10.76 krone after the announcement, down from 10.79 just before it.
Norway's move stands out in a week of split decisions in Europe. The Swiss National Bank kept its rate at zero, and Sweden's Riksbank held at 1.75% while saying a hike later this year had grown more likely. The Federal Reserve raised its benchmark range to 3.75% to 4% last week. Mexico's central bank, with its rate at 6.50%, was scheduled to announce its decision later on Thursday.
Raising rates on a below-forecast core reading tells investors how Norges Bank is weighing the evidence. One good month did not outweigh a forecast that has inflation above target for three more years. That makes the next few core readings the swing factor. If core inflation keeps undershooting the bank's projections, the case that 4.50% is the peak strengthens. If it drifts back up, the governor's offer to go further moves to the center of the debate.