(Bloomberg) -- Norway’s unemployment rate matched the lowest level in 14 years, indicating labor market strength that could convince the central bank to raise rates more than previously expected.

The seasonally adjusted registered jobless rate for January declined to 1.6% from a revised 1.7% in December, matching July’s level that was the lowest since 2008, data from the Norwegian Labor and Welfare Administration showed on Friday. Norges Bank had expected a rate of 1.7%.

The resilience of the labor market suggests the fossil fuel-rich economy may be facing a milder recession this year than what’s expected by the central bank. Still, recent data shows high inflation and soaring credit costs have hampered consumer spending and cooled a housing market that boomed during the pandemic. 

The figures are likely to remove any remaining doubts that the central bank will proceed with a quarter-point hike in the benchmark interest rate to 3% next month. They may also increase bets that policy makers are likely to extend their interest-rate hikes beyond March.

“The labor market is still tight, and is tighter than at the cyclical high during 2018-19, and is still at the tightest levels since before the financial crisis,” Kjetil Martinsen, Swedbank’s chief economist for Norway, said in a note to clients, while adding there are now “clear signs” that the labor market is softening. “Norges Bank has plenty of arguments to hike again in March – a markedly weaker NOK and a still tight labor market being some of them.”

Marius Gonsholt Hov, Svenska Handelsbanken AB’s chief economist for Norway, said “expectations for another rate hike in March, to 3%, should be locked in,” in a note to clients. “But we continue to believe that Norges Bank will refrain from further hikes, and instead plateau at 3% for the rest of the year.”

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