(Nettavisen): In the recent report Economic outlook from Nordea Markets, chief economist Kjetil Olsen and senior strategist Dane Cekov write that the mood among consumers has turned from strong pessimism to optimism.
There are several points that Nordea believes are good news for consumers:
- A solid wage settlement and falling price growth will give better purchasing power.
- The interest rate peak has probably been reached, in line with Norges Bank’s statements in December.
- Second-hand house prices have increased by six per cent this year.
- Nordea believes the policy rate will slow down next year, which will provide better advice for anyone with debt.
– Increased purchasing power will lift private consumption and give a better atmosphere among service companies, but also in those parts of the retail trade that have struggled since the pandemic, write currency strategist Dane Cekov and chief economist Olsen.
Nordea believes that households will notice that their purchasing power gradually improves from the summer, when the supplements from the salary settlement are paid out. Together with interest expenses ceasing to rise, it will provide a more spacious family economy.
In a calculation from Nordea, a household will have close to NOK 2,000 more to spend per month at the start of 2025.
– We are therefore more optimistic on behalf of the Norwegian economy.
No interest rate cut this year
– Everyone seems to be waiting for the first interest rate cut from Norges Bank. But if we look at the situation in the Norwegian economy right now, it is really surprising that we are even talking about interest rates going down, the chief economist opens the report with.
He highlights several points, such as the fact that price growth was still 2.5 per cent higher in March than the inflation target.
Wage growth is likely to end up above five percent for the second year in a row, which is a figure we have not seen for 15 years. The krone exchange rate is historically weak, house prices have risen six per cent so far this year, and unemployment has remained close to record low levels since August last year.
– There is little from such a review that screams interest rate cuts. Nor do the prospects for the Norwegian economy or price growth indicate very much lower interest rates.
Four percent policy rate
In December, Norges Bank increased the key interest rate to 4.5 per cent. In March, they signaled that the key interest rate will most likely be lowered in September.
The latest interest rate forecast shows approximately one interest rate cut per six months, and a policy rate down to 3.5 per cent at the end of 2025.
– We think Norges Bank will delay the interest rate cuts even longer, and do not envisage a first cut until 2025. In our forecast, the key interest rate will land at four per cent at the end of 2025.
Nordea believes in fewer interest rate cuts and a higher one than many. Both Norges Bank and the American central bank (Federal Reserve, Fed) believe the neutral interest rate is 2.5 per cent.
