Norway Central Bank Holds Interest Rate at 2.25%

Norway's central bank, Norges Bank, maintained its key policy rate at 2.25%, and signaled further rate increases.  The Bank said: "Overall, the Executive Board is of the view that the key policy rate should gradually be raised through the latter half of 2011, against the background of the current outlook and balance of risks.  An unexpected jump in activity or in price and cost inflation may lead to a more pronounced upward shift in the key policy rate than currently projected.  Should the turbulence in financial markets lead to considerably weaker growth or a marked krone appreciation, the increase in the interest rate may be deferred further ahead."

At its previous meeting the Bank increased the interest rate by 25 basis points to 2.25%.  The Bank expects inflation to remain relatively low, but to progress towards the 2.5 percent inflation target (but with due upside inflation risks); Norway reported annual inflation of 1.6% in May, up from 1.3% in April this year.

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