Norway raises key interest rate to fight inflation and expects further hikes ahead

COPENHAGEN, Denmark (AP) — Norway’s central bank said Thursday that it has raised its key interest rate by half a percentage point in an effort to “bring inflation down to target.”

Norges Bank said higher wage growth and a weaker-than-projected krone will raise inflation and that “international interest rates have risen more than anticipated.”

The Scandinavian country, which is not part of the European Union, had an inflation rate in May of 6.7%. That’s far above the central bank’s target of 2%.

“If we do not raise the policy rate, prices and wages could continue to rise rapidly and inflation become entrenched. It may then become more costly to bring inflation down again,” bank Gov. Ida Wolden Bache said in a statement.

However, the bank said, “pressures in the Norwegian economy are easing.” Following Thursday’s hike to 3.75%, the policy rate will most likely be raised further in August, Norges Bank said.

It comes on a busy day for central bank action in Europe, including rate decisions from the United Kingdom, Turkey and Switzerland. Central banks around the world have rapidly raised interest rates to combat high inflation that is squeezing households and businesses.