UPDATE 2-Norway sticks to December rate hike plan as economy rebounds

* Norges Bank holds base rate at 0.25%

* Continues to signal December hike

* Says economy recovering as expected

* Stronger currency could temper inflation (Adds quotes, currency, background)

By Terje Solsvik and Victoria Klesty

OSLO, Nov 4 (Reuters) – Norway’s central bank plans to raise its key policy interest rate next month, it said on Thursday, continuing a campaign of monetary tightening that started in September https://www.reuters.com/world/europe/norway-raises-interest-rates-says-another-hike-likely-december-2021-09-23.

Norges Bank’s monetary policy committee kept the rate on hold at 0.25% for now, as unanimously expected in a Reuters poll of economists.

“Based on the committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in December,” Governor Oeystein Olsen said in a statement.

The Norwegian economy has rebounded strongly from the pandemic, aided by an end to lockdowns and a sharp rise in the price of oil and gas, the country’s biggest export https://www.reuters.com/article/power-prices-norway-tradefigures-idUSKBN2H50I2.

Norges Bank’s monetary policy committee in September raised rates for the first time in two years and said it planned to hike again by year-end followed by three more hikes in 2022.

“The reopening of society has led to a marked upswing in the Norwegian economy, and activity is higher than its pre-pandemic level. The economic upturn is continuing broadly as expected,” Norges Bank said.

“Looking ahead, higher economic activity and rising wage growth will likely lift underlying inflation, but the recent (crown currency) appreciation could curb the rise in prices,” it added.

While Norway was among the first of the developed economies to start reversing its ultra-loose policies, several others have since followed suit https://www.reuters.com/business/finance/great-central-bank-exit-begins-norway-hikes-rates-2021-09-23.

On Wednesday the U.S. Federal Reserve said it will begin trimming https://www.reuters.com/business/with-bond-buying-taper-bag-fed-turns-wary-eye-inflation-2021-11-03 its bond purchases, but neither the Fed nor the European Central Bank are expected to hike rates any time soon.

The crown weakened slightly to 9.87 against the euro at 0907 GMT from 9.85 just before Norges Bank’s announcement. In the last three months, the crown has strengthened by about 7% against the euro. (Reporting by Terje Solsvik and Victoria Klesty, Editing by Gwladys Fouche and Hugh Lawson)

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