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FxWirePro: Krone rises central bank hints rate hike ahead

Norwegian Krone has jumped against its major trading counterparts on Thursday as the Norges Bank kept monetary policy unchanged at today’s meeting but hinted that a rate hike will be appropriate soon. Since the oil price crash of 2014, Norges bank sharply reduced rates from 1.5 percent in 2014 to 0.5 percent by early 2016 and it has kept the policy rate unchanged since. This is the first time the central provided an exclusive hint of a rate hike. The last time the central bank increase rates were in 2012. Here is the full statement from the Norges Bank translated into English,

“On 2 March, the government adopted a new monetary policy regulation. The inflation target is now 2 percent, compared with previously 2.5 percent. The new regulation will not lead to significant changes in the pursuit of monetary policy. Inflation management is flexible with emphasis on developments in production and employment. A lower target number in itself has little significance for interest rate prospects in the near future.

The economic recovery continues both at home and abroad. Growth appears to be somewhat stronger than previously expected, and capacity utilization in the Norwegian economy is approaching a normal level. Underlying inflation is low, but higher capacity utilization will probably contribute to the growth in prices and wages gradually increasing.

Monetary policy is expansive. The outlook for the Norwegian economy indicates that it will soon be correct to raise the key rate. Uncertainty about the effects of a higher interest rate speaks to be cautious. Overall, the changes in the outlook and risk scenario indicate a somewhat earlier rate of increase than in the previous report.”

"As we look at the outlook and the risk picture, the key rate will most likely be set up after the summer of this year" said Øystein Olsen, Governor of the Central Bank.

The Norwegian Krone is currently trading at 7.6898 against the dollar, up 0.5 percent for the day so far. It is trading at 9.5 per euro, up 0.63 percent for the day so far.

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