The short version
- An interest rate cut of 0.25 percent is predicted in Sweden
- It is expected that the Norwegian key interest rate will be kept stable at 4.5 per cent
- In short, the differences are due to the fact that the Norwegian economy is growing, while the Swedish economy is in decline
- One of Norway’s biggest challenges is a weakened krone and high inflation
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Sweden, which has a policy interest rate of 4 percent, expects an interest rate cut in May.
On Friday, the interest rate decision will come from Norges Bank, where no change in the policy rate of 4.5 per cent is expected.
But why is it that the Swedes can get even cheaper loans than us Norwegians? In short: The Norwegian economy is doing far better than the Swedish one.
Chief economist at Sparebank1
– The Swedish economy may need lower interest rates, while the Norwegian economy does not. Price and wage growth is lower in Sweden than in Norway. In Sweden, there is a clear decline in the economy, while in Norway there is still growth, says chief economist Harald Magnus Andreassen at Sparebank1 to VG.
Swedish Nordea believes that The RiksbankSweden’s central bank lowers the interest rate by 0.25 per cent in May and that the Swedish interest rate continues to fall.
Chief economist Annika Winsth points to three reasons why the Riksbank wants to lower the interest rate:
- Sweden’s GDPGross domestic product (GDP) is equal to the sum of all goods and services produced in a country during a year, minus the goods and services that are used during this production. is worse than expected
- Unemployment is higher than expected
- Inflation is significantly weaker than expected
Chief economist at Nordea Sweden
– In Norway, unemployment has hardly increased, at least not NAV unemployment. House prices have fallen by around ten percent in Sweden. In Norway, prices were at a record level in March, explains Andreassen.
– Housing construction has fallen more in Sweden than in Norway. In Sweden, there is no growth in household debt, and households save far more than in Norway and more than normal. In Norway, we save less than normal.
Two other important things that separate us from “sweet brother” are the oil and the high inflation.
Professor Ola Honningdal Grytten at NHHNHH explains that the normal has been that high oil prices have served Norway well, but:
– Since Russia invaded Ukraine, oil prices have contributed very little to a strengthened krone. We probably have to make up for that with higher interest rates compared to the countries we trade with, says Grytten.
– When the krone falls, everything we import becomes more expensive, because we pay in foreign currency. When the foreign currencies rise in relation to the Norwegian one, inflation increases.
Grytten explains that inflation is brought down by raising the interest rate, which gives citizens poorer options and less demand. At the same time, the krone can strengthen, which counteracts inflation.
– We have different problems than Sweden. Norway does not have a weak economy, but a problem with the krone weakening, says Grytten.
Professor at NHH
Norges Bank has announced that, after all the sunshine, there will not be an interest rate cut until the autumn. Chief economist Andreassen points to several reasons that support this:
- Growth in the mainland economyThe economic activity that takes place in Norway, when one disregards oil and gas extraction and export, as well as foreign shipping.
- Lower unemployment
- Increased housing prices
- Expenditure in the state budget will probably increase faster than expected
- The oil price has the place
- The fall of the krone exchange rate
– In addition, belief in interest rate cuts abroad is significantly reduced. If the bank followed its interest accounts slavishly, the interest rate should have been raised this week. I think the bank will rather announce that it envisages keeping the interest rate at the current level for longer than “a good while”, as it formulated it in March, says Andreassen.
On Wednesday, the US central bank will hold an interest rate meeting. Both Grytten and Andreassen agree that what this and other foreign banks choose to do affects the Norwegian interest rate.
– With the weak krone exchange rate, it is probably extra difficult to cut interest rates if other countries’ central banks do not do so. However, the weak krone means that there will be no problem for Norges Bank to keep the key interest rate unchanged, even if other central banks were to cut their interest rates, says Andreassen.
But on to the most important thing, will lower Swedish interest rates lead to cheaper Swedish trade?
– I doubt that there will be major effects, but if anything it will be a slightly weaker Swedish krone, concludes Andreassen.
