Norway set for first rate hike in 7 years next week

OSLO: Norway's central bank is expected to hike its key policy rate for the first time in seven years next week, as the economy accelerates and inflation picks up, a Reuters poll showed on Thursday.

Growth in oil producer Norway is rebounding with higher crude prices, while persistent growth in household debt levels provide further cause for monetary tightening, economists said.

In June the Norwegian central bank said its key policy rate would most likely begin to rise in September from a record low 0.5 percent.

All 17 economists polled by Reuters predicted rates would rise by a quarter percentage point to 0.75 percent next week, and a majority of participants expected further hikes to 1.25 percent by the end of the third quarter next year.

"Solid growth, stronger than expected inflation, elevated inflation expectations and a weaker than forecast exchange rate suggest not just a 25 basis points rate hike, but also an upward revision to the rate path," NatWest Markets analyst Nicholas Mannion said.

August core inflation, released earlier this week, rose more than expected to 1.9 percent, closing in on the two percent inflation target and further boosting rate hike expectations.

The central bank will also release a full set of forecasts in a new monetary policy report.