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By Camilla Knudsen
OSLO, Sept 25 (Reuters) - The Norwegian central bank will take a cautious approach to rate hikes in coming years to assess the impact on households from tighter monetary policy, Norges Bank Governor Oeystein Olsen said on Tuesday.
Last week the central bank hiked rates for the first time in seven years amid stronger growth and higher inflation, but also set a more gradual path for future hikes to account for risks from abroad.
“After a long period of low interest rates, the key policy rate is again on the rise. The rate increase can be expected to be gradual and is a response to the solid activity we now see in the Norwegian economy,” Olsen said in a speech.
“With the high level of household debt, the rate increase will likely have a greater impact on private consumption than earlier. However, the strength of this impact is uncertain. This suggests a cautious approach to interest rate setting,” he added.
Dubbed a ‘dovish hike’ by economists, last week’s policy announcement triggered a weakening of the Norwegian crown against the euro and dollar, although the currency has since partly recovered. (Writing by Terje Solsvik, editing by Gwladys Fouche)