UPDATE 2-Norges Bank corrects rate path, Aug hike even surer

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Tue Jun 28, 2011 8:25am EDT

* Average rate in Q3 now seen at 2.39 pct, not 2.35 pct

* Correction boosts likelihood of August hike vs. September

* Norwegian crown strengthens on path correction

(Adds analyst reactions, updates crown)

By Terje Solsvik and Walter Gibbs

OSLO, June 28 (Reuters) - Norway's central bank said on Tuesday it had corrected its interest rate path projection, making an August rate hike more likely than indicated after its rate-setting meeting last week and angering some economists.

"There was a typo in the original spreadsheet, which we then corrected," Norges Bank spokesman Oeystein Sjoelie told Reuters.

Last Wednesday Norges Bank held its key rate at 2.25 percent and indicated rates would rise two or three times by the end of 2011.

Background data accompanying the decision suggested the first hike would come in August or September, with August more likely. Without the error, analysts said, there would have been no doubt Norges Bank was targeting August.

SEB fixed-income strategist Erica Blomgren said via Twitter it was "insane" for Norges Bank to correct the rate path without notifying markets in an orderly way.

The Norwegian crown strengthened against the euro after the news to 7.8056 at 0818 GMT against 7.8350 just before. It hit an intra-day high of 7.7860 before easing to 7.8025 by 1155 GMT.

Asked if the new spreadsheet gave a 100 percent probability of an August rate hike, rather than the 60-70 percent forecast by some economists, Sjoelie said "that's probably right".

"Both of the numbers that were published gave an overwhelming probability of an August rate hike, though," said Sjoelie.

Financial services group Nordea pointed out the mistake in a market report on Tuesday after its analysts discovered that Norges Bank had changed the data posted on its website without announcing it.

"Everybody makes mistakes but the main point is that when you change market-sensitive news like this you should tell the market by posting the news on the Internet site so everybody gets the news at the same time," said Nordea's chief analyst, Erik Bruce.

In last week's erroneous spreadsheet, Norges Bank gave the average rate it expected to maintain across each upcoming quarter. The average rate forecast for the third quarter should have been 2.39 percent, not 2.35 percent, the bank now says.

"It was more than just a typo," said Bruce. "There were also mistakes in a table where they present various factors used in revising the interest rate forecast. They have now changed that so it is in line with the new total."

"The changes in the rate path are small, but the probability for August has increased," DnB NOR senior economist Kyrre Aamdal wrote in a Tuesday report.

"We guess Norges Bank presented a wrong rate path by a mistake and has corrected it by changing the figures. We understand that such accidents may take place, but we do not appreciate that the markets were uninformed (of) the changes."

Norges Bank's director of communication, Siv Meisingseth, said bank officials detected the "small mistake" soon after Deputy Governor Jan Qvigstad announced the rate decision at 2 p.m. on Wednesday. She said the figure was corrected on the website before 4 p.m.

"We can see in retrospect that we could have informed in a better way," Meisingseth said

"What we want to say is that it is highly probable the interest rate will go up in August," she said. "That was the message last week in the first interest rate path and it is confirmed in the one that we have changed."

(Additional reporting by Camilla Knudsen and Gwladys Fouche in Oslo, editing by Stephen Nisbet)

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