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Norway's central bank maintains key rate, expects hike in March 2019

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Norway's central bank maintains key rate, expects hike in March 2019

Norway's central bank decided to keep its key policy rate unchanged at 0.75% and said it would most likely raise the rate in March 2019.

Norges Bank said the outlook and balance of risks imply a gradual rise in interest rate in future, and called for a cautious approach to the interest rate setting process, citing the uncertainty surrounding the effects of higher interest rates.

"Spare capacity has gradually diminished, and capacity utilization seems to be close to a normal level," the central bank said, adding that underlying inflation is near the 2% target.

The central bank said that if the policy rate is maintained at the current level for a long time, financial imbalances could build up and price and wage inflation may accelerate. This could raise the risk of a sharp economic decline, the bank noted.

The bank also warned that increasing the policy rate rapidly could restrain the continued economic growth, resulting in higher unemployment and extremely low inflation.

"The policy rate forecast is little changed, but the fall in oil prices and weaker global growth prospects imply a slightly slower rate rise than in the September Report," the central bank said.

"Inflation is projected to remain close to target in the coming years, at the same time as unemployment remains low."