Norway makes three
The Norwegian central bank has hiked rates 25 basis points, making it the third central bank and first European central bank to do so since the global recovery process started.
Norway’s central bank increased its key interest rate by a quarter point to 1.5 per cent on Wednesday – Europe’s first monetary policy tightening since the global economic crisis bit hard last year.
Norges Bank said it would gradually continue more rises, holding with its main rate at between 1.25 and 2.25 per cent until the next monetary policy report in late March.
Analysts believe the central bank seeks to keep rates around the mid-point of the range, signalling another 25 basis point rise.
Israel and Australia have also raised rates, with the Australian rate rise coming somewhat unexpectedly. Australia and Norway are particularly geared to commodities exports. As such, it is hard to say that these rate hikes have any significance for the rest of the developed world. At a minimum, they show that interest rates are not going lower; interest rate risk is now clearly to the upside.
Of particular note, should be the fact that the central bank cited asset prices as a driving motivation behind the increase in rates. Norges Bank head Svein Gjedrem recently warned that house prices were back to their summer 2007 peak and that the market risked overheating.