Norway’s central bank enacts big rate hike to tame inflation

Category: Business


Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. entail / ɛnˈteɪl / (v.) – to involve something as a part or result

    I know that making a huge investment entails some risk.

  2. entrenched / ɛnˈtrɛntʃt / (adj.) – firmly fixed in a very strong position that cannot be changed so easily

    Computers are an entrenched part of our lives.

  3. tip / tɪp / (v.) – to push or tilt something toward the other side

    The cat tipped the tower of plates, so most of them are broken.

  4. envisage / ɛnˈvɪz ɪdʒ / (v.) – to imagine or expect something good in the future

    The newly built city is envisaged as the new capital.

  5. outlook / ˈaʊtˌlʊk / (n.) – a set of conditions that will likely happen in the future

    The outlook for the company is uncertain because of the economic situation.


Read the text below.

Norway’s central bank raised its key policy interest rate by half a percentage point, saying “inflation has been considerably higher than projected.”

The rate’s increase to 1.75% was larger than expected as the bank takes aim at inflation that reached 6.8% in July. It noted that unemployment is very low, falling more than expected last month to 3.2%, and “activity in the Norwegian economy is high.”

“The rise in prices has been broad-based in recent months and may entail that inflation will remain high for longer than expected earlier,” Norges Bank said in a statement. “A faster rate rise now will reduce the risk of inflation becoming entrenched at a high level and the need for a sharper tightening of monetary policy further out.”

It comes as central banks around the world are making big rate increases to tackle decades-high inflation. The U.S. Federal Reserve, Bank of England and European Central Bank have all carried out hikes of a half-point or larger in recent weeks as they look to cool down the economy without tipping it into recession.

The central bank in Norway, which is not a member of the European Union, noted that “persistent global price pressures will lead to a further acceleration in price inflation.”

“On the other hand, the rise in interest rates and high inflation may cool down the housing market and curb household consumption faster than currently envisaged,” the bank said. “There is also a risk of a sharper slowdown in global growth.”

Based on the outlook and balance of risks, the bank said it will likely raise the policy rate further in September.

This article was provided by The Associated Press.

Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

  • The rise in interest rates and high inflation may cool down the housing market, and that means house prices will go down. Would you be interested in buying a new house when that happens? Why or Why not? Discuss.
  • In what area in your country would you like to buy a house? Why? Discuss.

Discussion B

  • What is the condition of real estate market in your area (ex. expensive, affordable)? Discuss.
  • What adjustments will you make if the inflation lasts longer than expected (ex. lessen spending on leisure, find a place with cheaper expenses)? Discuss.