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Norway's central bank chief Oystein Olsen: Assumes that the economy will recover
Photo: Victoria Klesty / REUTERS
The major central banks are still hesitating: The European Central Bank (ECB) has already slowed down its bond purchase program, and the Fed's monetary authorities have announced an increase in the key interest rate for 2022.
By contrast, Norway has now made a real change of course in monetary policy.
The Scandinavian industrial country has abandoned its zero interest rate policy and raised the key interest rate by a quarter point to 0.25 percent.
Further rate hikes could follow, announced the central bank in Oslo.
The forecast of four further steps by the end of 2022 up to an interest rate of 1.25 percent has now become more likely.
The central bank last raised interest rates in September 2019.
During the pandemic, the key interest rate was reduced to zero in May 2020.
Central bank governor Oystein Olsen referred to the normalization of the economy, which also necessitated a gradual normalization of interest rates.
The country's consumption-driven upswing has exceeded the central bank's expectations.
Registered unemployment was also lower than expected.
The inflation rate had recently risen to 3.4 percent.
However, the core rate, which excludes quantities that are prone to fluctuations, fell to 1.0 percent.
Norges Bank is the first central bank among the major economies to raise its key interest rate since the corona crisis.
Most recently, however, the central banks in the Czech Republic, Hungary, South Korea and Iceland had tightened their monetary policy.
The Norwegian krone rose after the decision on other major currencies.
Norwegian government bond prices fell.
Switzerland is sticking to its expansionary monetary policy
While Norway, also known as the Switzerland of the North due to its oil wealth, is leading the way, the Swiss National Bank (SNB) is sticking to its expansive monetary policy - despite rising inflation.
The key interest rate and the interest on sight deposits at the central bank will remain at minus 0.75 percent, as announced by the SNB.
The monetary authorities continue to rate the franc as highly valued, and if necessary they want to continue to use foreign exchange market interventions to counter an economically damaging appreciation of the national currency. "The National Bank is continuing its expansionary monetary policy unchanged in order to ensure price stability and to further support the recovery of the Swiss economy from the consequences of the corona pandemic," it said in support of the statement. For more than six years, the three-person board of directors led by SNB President Thomas Jordan has relied on historically low negative interest rates and foreign currency purchases to prevent the franc from appreciating.
With this policy, the SNB is still in line with the ECB.
Although it had announced that it would slow down the pace of its crisis bond purchases, an end to the emergency aid to overcome the coronavirus crisis is not in sight.
It is worrying that the SNB's economic assessment is also more cautious than it was recently.
It expects the gross domestic product (GDP) to rise by around three percent in the current year, compared with around 3.5 percent in June.
The overall economic production capacities would remain underutilized for a while.
In contrast, inflation in Switzerland is likely to rise a little more strongly this year and next than previously estimated.
According to the forecast, consumer prices will rise by 0.5 percent in 2021, then by 0.7 percent in the next and by 0.6 percent in 2023.
There is therefore no need for action for the SNB, which is targeting inflation between zero and two percent.
apr / dpa / Reuters
