Norway raises interest rates as global peers eye cuts

Oslo (AFP) –


The Bank of Norway raised its key interest rate on Thursday, bucking a worldwide trend by central banks looking at cutting rates due to a cooling global economy.

Saying that the "upturn in the Norwegian economy appears to be a little stronger" than expected, the bank hiked the rate by 0.25 percentage points to 1.25 percent.

The biggest oil and gas producer in western Europe, Norway's third rate hike since last September had been widely expected due to the strength its economy, which has been propelled by a rebound in oil investments and the weakness of the kroner.

The central bank said it expects Norway's mainland GDP, which excludes the oil and shipping sectors, to grow by 2.6 percent this year and 1.9 percent in 2020.

It also indicated another cut could soon follow.

"Our current assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased further in the course of 2019," the bank's governor Oystein Olsen said in a press statement.

Norway's hawkish stance comes in the same week as two centrals banks crucial to the global economy -- the US Federal Reserve and the European Central Bank -- hinted at possible future rate cuts to counter a global slowdown amid uncertainty over the US-China trade war.