USD/NOK comes off 5-week high as Norges Bank hikes policy rate to 4%

The Norwegian Krone bounced from a five-week trough against the US Dollar on Thursday, after Norges Bank raised its key policy rate by 25 basis points to 4% at its August meeting, in line with market expectations.

With interest rates now being at their highest level since 2008, Norway’s central bank said it would likely raise them once again in September.

Norway’s annual consumer price inflation has eased in recent months, but still remains elevated and well above Norges Bank’s inflation target.

The country’s core consumer inflation, which does not take into account energy prices, slowed to 6.4% in July from a record 7% in June.

If the Krone proves to be weaker than forecast or pressures within the economy continued persisting, the benchmark rate will need to be raised to more than 4.25%, Norges Bank said.

“The future policy rate path will depend on economic developments. If the economy evolves as currently anticipated, the policy rate will be raised further in September,” Norges Bank Governor Ida Wolden Bache said in a statement.

As of 9:23 GMT on Thursday USD/NOK was edging up 0.25% to trade at 10.6294. Earlier in the session, the exotic Forex pair went up as high as 10.6736. The latter has been the pair’s strongest level since July 10th (10.6757).