– No interest rate cut this year – NRK Norway – Overview of news from different parts of the country

Predictions about what kind of path rent will take have been a topic of discussion for a long time. The key interest rate is now at the highest level since 2008, and many are anxiously waiting for a cut.

If the economists at Nordea are to be believed, it won’t happen this year.

– There is little that screams interest rate cuts, says chief economist Kjetil Olsen. And he explains that assessment as follows:

• It the underlying price increase, which is the price increase excluding energy prices and changes in taxes, was 4.5 per cent in March. It is down from the peak of 7 per cent in June last year, but still far from Noregs Bank’s target for this figure to be around 2 per cent.
• The krone exchange rate is historically weak – and an interest rate cut will only make matters worse
• Wages are expected to rise by more than 5 per cent for the second year in a row. Then people will have more money to spend on things, which can help push prices up. People’s consumption has been flat for the past year, but will pick up as a result of the wage settlement, according to Olsen.
• The unemployment rate has remained stable at 1.9 per cent since August last year, which is close to a record low level. Nordea believes it will remain at almost the same level, and be at 2 per cent at the end of the year.

In comparison, the big bank DNB’s forecast, which came out a week ago, is that there will be an interest rate cut in December.

– Surprisingly good

Olsen believes that the fact that there will be no interest rate cut is actually good news.

– It reflects that the Norwegian economy has done surprisingly well and tolerates the level of interest rates we have today, says Olsen, and must admit that he is surprised by just that.

– Unemployment is very low, and it will remain low. So the alternative could have been that things went badly in the Norwegian economy, and that Norges Bank therefore had to lower interest rates. But that is not how we assess the prospects for the Norwegian economy, he claims.

Because even if the interest rates make a big dent in the wallet for many, the Norwegian economy as a whole is doing well.

The weak krone exchange rate stings for many who are going to travel abroad, and also contributes to pushing up the prices of goods we import.

But for others, such as the oil industry and other export industries, the money flows in for exactly the same reason. This means that the Oil Fund also puts on weight, and it provides more oil money to collect and use for the government.

But one industry has really felt the price for the total of 14 interest rate increases we’ve had in recent years: the construction industry. On Tuesday, Eiendom Norge CEO Henning Lauridsen was out again and said that the interest rate cut cannot come quickly enough.

Two interest rate cuts next year

– When will what many feel is a long-awaited interest rate cut come?

– It will be enough. There will be two interest rate cuts next year, one in the first half of the year and one in the second half of the year, and those are the interest rate cuts we will get. People must expect a higher level of interest going forward than what we have become accustomed to during the last decade, says Olsen.

In March, central bank governor Ida Wolden Bache signaled that an interest rate cut could come in September. But on Tuesday she was aware that many new figures and information have come in since March, which can always lead to major changes in the plans.

– We have been talking for a long time that we now have to see the end of all the money people saved during the corona pandemic. Where do people get the money, and what is the reason why they think consumption will actually increase in the future?

– First, the income for everyone with debt increased a lot during the pandemic, because the interest rate was cut to zero. Then purchasing power has fallen a lot as a result of the interest rate hikes. But where we are now, people do not have very much lower purchasing power than before the pandemic, says Olsen. He asserts:

– With the wage settlement that we are getting now, our assessment is that purchasing power will be above what it was before the pandemic during 2024.