Norway set for rate hike as economy accelerates, statistics agency says

The Norwegian economy is set to grow rapidly in the next several years as it recovers from the impact of the pandemic, setting the stage for an imminent central bank rate hike, Statistics Norway (SSB) predicted on Friday.

“The reopening of society is well underway, and the upswing in the Norwegian economy continues. The COVID-19 pandemic will nevertheless continue to impact on the economy for a long time to come,” SSB said.

“The first interest rate jump is expected to be in September.”

Non-oil gross domestic product (GDP) will rise by 3.6% in 2021, the agency predicted, more than the 3.1% growth seen in June, while next year will see expansion of 3.8%, down from 4.1% predicted three months ago.

SSB at the same time raised its growth forecasts for 2023 and 2024.

The Norwegian central bank last year slashed rates to a record low 0.0%. It has said it intends to hike twice this year and three times in 2022, likely beginning at its next policy meeting on Sept. 23.

The key policy rate will likely rise to 1.75% in 2024, SSB predicted, in line with the agency’s previous forecast.

Statistics Norway’s forecasts are based on authorities expecting to fully vaccinate some 90% of adult Norwegians over the next four to six weeks, SSB said.

“If these assumptions are not fulfilled, further economic recovery will take longer than our calculations show,” it said.