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Norway Unlikely To Raise Rates Until Next Year

Norway's central bank will wait until 2019 before raising interest rates as the economy performed strongly amid subdued inflation pressures, Jack Allen, an economist at Capital Economics, said.

Total GDP contracted 0.3 percent sequentially in the December quarter after growing 0.8 percent in the September quarter, official data showed on February 9.

However, Mainland GDP expanded strongly by 0.6 percent at the end of the year. As a result, mainland GDP growth for 2017 as a whole reached its strongest in three years.

Looking ahead, annual mainland GDP growth looks set to remain healthy, Capital Economics anticipated.

Nevertheless, Allen noted that inflation looks set to rise only slowly.

The Norges Bank's target measure of inflation - CPI-ATE - fell to just 1.1 percent in January, leaving it well below the 2.5 percent target.

Admittedly, exchange rate effects should push the rate up a little this year but domestic price pressures are subdued, the economist noted.

"With the housing market still a worry, we think that the Norges Bank will err on the side of caution and wait until 2019 before raising interest rates, which would be later than most expect," the economist concluded.

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