May 9, 2019 / 8:09 AM / 2 months ago

UPDATE 2-Norway's central bank plans June rate hike

* Keeps policy rate on hold at 1.0 pct

* Says rates will most likely rise next month

* Policy contrasts with that of other central banks (Adds quote, bullets, background)

By Gwladys Fouche and Terje Solsvik

OSLO, May 9 (Reuters) - Norway’s central bank said on Thursday that interest rates would most likely rise in June, a rare example of authorities sticking to plans to tighten monetary policy despite concerns about a global economic slowdown.

Norges Bank kept its main interest rate unchanged at 1.0 percent, as unanimously predicted by a Reuters survey of 26 economists.

“The Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely be raised in June”, Governor Oeystein Olsen said in a statement accompanying the decision.

The central bank had said in March the key policy rate would most likely be raised in the course of the next half-year, and that the most probably timing of a hike was at its June board meeting.

The Norwegian currency, the crown, strengthened against the euro on the news.

“Norges Bank gives clear signals of a June (hike). Clearly on the strong side to expectations,” Nordea Markets wrote in a note to clients.

It would be the third hike by the central bank since it began a campaign of tightening policy in September last year.

The policy contrasts with that of many central banks, notably the U.S. Federal Reserve, the European Central Bank and others in Europe, which have been keeping rates on hold due to rising economic uncertainty

Factors such as renewed trade tension between China and the United States, and the risk of a disorderly exit by Britain from the European Union have clouded the outlook.

“The outlook and balance of risks continues to imply a gradual increase in the policy rate. The uncertainty surrounding global developments persists. In Norway, capacity utilisation appears to be rising broadly as expected, while inflation has been slightly higher than projected,” Norges Bank said. (Additional reporting by Victoria Klesty; Editing by Toby Chopra)

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