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Dow Jones Newswires: Norway central bank raises interest rate to surprise 1.25% from 0.75%, signals next move in August

Norway’s central bank unexpectedly raised its key policy rate to 1.25% from 0.75% on Thursday, and said it expects to raise the rate further to 1.50% in August.

Analysts polled by The Wall Street Journal had expected the central bank to raise its key rate to 1.00%.

Norges Bank said it now expects the policy rate to rise to around 3% in the period to summer 2023.

“This is above what is estimated to be a neutral policy rate,” it said.

It had previously expected a rate of around 2.5% at the end of 2023.

The central bank said inflation is markedly above target with underlying inflation higher than projected, and with rising wage growth and imported goods inflation, there are prospects that inflation will remain above target for some time.

A markedly higher policy rate is needed to stabilize inflation around target, it said.

“Prospects for a more prolonged period of high inflation suggest a faster rise in the policy rate than projected earlier,” Governor Ida Wolden Bache said.

“A faster rate rise now will reduce the risk of inflation remaining high and the need for a sharper tightening of monetary policy further out,” she said.

Write to Dominic Chopping at dominic.chopping@wsj.com

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