Norway’s Central Bank Poised to Raise Again Even as Growth Cools

(Bloomberg) --

Norway’s central bank is poised to squeeze in another interest rate increase next week as a batch of weaker-than-estimated economic data still points to “solid” growth.

On Tuesday, policy makers in Oslo were handed the final pieces of the puzzle ahead of the Sept. 19 rate announcement. The bank’s survey of businesses, a key input, revealed that the near-term outlook is cooling but growth will be in line with the bank’s forecast.

“This report underscores that Norges Bank is correct in being the only hawk among western central banks,” Swedbank economists, including Kjetil Martinsen, said in a note.

Norges Bank should seize the opportunity to raise rates while the window remains wide open, the Swedbank economists said.

The central bank has raised rates three times since September last year to cool an economy being stoked by oil investments.

“Growth in the business sector has remained solid in the summer months,” the bank said on Tuesday. “The global turbulence does not appear to have acted as a substantial drag on activity, even though some enterprises have noted a decline in external demand. Contacts expect growth to slow slightly over the next six months.”

Inflation, also released Tuesday, showed that price growth in Norway slowed in August, missing both analyst and the central bank’s forecast. In isolation, the lower inflation should bring down the bank’s rate path, according to analysts, but not enough to call off the September rate increase.

Slower inflation is an argument for a somewhat lower rate path in 2020, but not enough to change Norges Bank’s view for a September hike, Nordea senior economist Erik Bruce said in a note.

To contact the reporter on this story: Sveinung Sleire in Oslo at ssleire1@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Stephen Treloar

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