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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (14433)	6/14/2000 11:31:00 AM
From: Justa Werkenstiff	Read Replies (1) \| Respond to of 15132

Wally: Aren't you glad you don't live in Norway? Gave them 50 and got in their face about more to come <g>!!! Norway central bank ups rates, warns of more By Alister Doyle OSLO, June 14 (Reuters) - Norway's central bank raised key interest rates by a bigger-than-expected half point on Wednesday to offset inflationary pressures in the oil-backed economy, and warned of more hikes to come. Labour Finance Minister Karl Eirik Schjoett-Pedersen said the hikes, double the rise expected by economists, were a "wake-up call" showing Norway could not go on a nationwide spending spree despite its burgeoning oil wealth. The bank's policy-setting executive board said it was hiking the deposit rate to 6.25 percent from 5.75 and the overnight lending rate to 8.25 percent from 7.75, effective Thursday. The rates, charged to banks, set a benchmark throughout the economy. The hikes angered unions who won higher pay after a six-day public sector strike last month. The crown hit a three-week high against the euro on the news, gaining to 8.2390 per euro from about 8.2600 just before. Three-month eurokrone rates leapt to 6.71 percent from 6.60. The hike mirrored last week's half-point rise by the European Central Bank, which lifted its refinancing rate to 4.25 percent. And Norway's central bank said it was sticking to a tightening bias. "The probability that the next change in interest rates will be an increase is greater than the probability of a reduction," central bank governor Svein Gjedrem said in a statement. The central bank last raised rates, by a quarter point, in April in the first hikes since 1998. The next meeting of its policy-setting executive board will be on August 9 after a summer break. NEED FOR SPENDING CONTROL Schjoett-Pedersen said the hikes underscored a need for tight fiscal policy even though surging prices for Norway's oil have triggered a public clamour for more spending on wages, hospitals, pensions and schools. "The interest rate rise by Norges Bank should be a wake-up call for those who give the impression that we can raise state spending because we have a big state budget surplus," he said. He said the central bank justified the hikes by pointing to "increased pressure in the economy, international rate increases and the development in the exchange rate." Norway pumps 3.2 million barrels per day (bpd) and is one of the world's top exporters behind Saudi Arabia. Oil prices are above $30 a barrel, three times their levels from late 1998. And Norway's 2000 budget surplus, stashed into a fund for future generations, is already projected at 133.1 billion Norwegian crowns ($15.50 billion). The main LO trade union denounced the rate hikes as "over-exaggerated" and "provocative" for many members. Private sector workers won average wage hikes of 4.6 percent after a six-day strike by 86,000 workers last month. The central bank has been seeking to limit inflation, which was running at 2.8 percent year-on-year in May. Wage growth has been higher than forecast and economic growth is accelerating after a sluggish 1999. Last week, Statistics Norway revised its forecast of gross domestic product (GDP) growth in 2000 to 3.1 percent from 2.7 forecast three months ago. In 1999, GDP expanded 0.9 percent. Twelve economists polled by Reuters early last week were unanimous in predicting a 0.25 percentage point rise for Wednesday. And the analysts were also unanimous in expecting further rises in the second half of the year, with forecasts ranging from a quarter to a full percentage point. Knut Anton Mork, chief economist at Handelsbanken in Oslo, said the central bank had yielded to political pressures at its last meeting in May by failing to raise rates despite higher-than-forecast wage rises. But he said Wednesday's rise meant the bank was "well on the road to restoring its reputation as an inflation fighter." 11:06 06-14-00