By Dominic Chopping

Norway's central bank raised its key policy rate on Thursday and said that it now expects the rate to peak at a higher level than previously anticipated as inflation remains markedly above target.

Norges Bank increased its key policy rate by 25 basis points to 3.00%, as expected, and said that despite considerable uncertainty about future economic developments, if things turn out as it now expects, the policy rate will be raised further in May.

The bank said that growth in the Norwegian economy is slowing, but economic activity remains high, the labor market is tight and wage growth is on the rise.

The central bank reaffirmed its stance that the future policy rate path will depend on economic developments, noting that if the krone proves weaker than projected, or pressures in the economy persist, a higher policy rate than currently projected may be needed to bring inflation down to target.

Alternatively, if inflation falls faster or unemployment rises more than projected, the policy rate may be lower than projected.

Norges Bank now expects the policy rate to increase to a peak of around 3.5% in the summer, having previously seen a top of around 3.1%, before gradually falling to around 2.5% by 2027.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

March 23, 2023 05:40 ET (09:40 GMT)