Krone rate, Interest | Sounding the interest rate alarm: – Never been so weak against the dollar

Wednesday morning costs one euro 11,14 Norwegian kroner.

– The Norwegian krone has never been as weak against the dollar as it is now, notes chief economist Kyrre M. Knudsen at SR-Bank – and adds that it is against the dollar that our currency has weakened the most.

It is bad news for one group in particular:

– The USA has almost never been as expensive as it is now, so let’s hope that those who have booked a holiday in the USA this summer have taken that into account, says Knudsen to Nettavisen.

also read

Interest rate bomb from the USA – top bank warns Norwegians with mortgages

He reminisces 12 years back in time, when a dollar cost NOK 5.50.

– Most things are turned upside down now. Then Norway flew high with high oil prices and higher interest rates than our trading partners. By comparison, the interest rate in the USA is now 5.5 per cent and in Europe 4 per cent.

In Norway, the key interest rate has been at 4.5 per cent since December last year.

On Friday, there is an interest rate meeting at Norges Bank, a so-called “intermediate meeting”, where the interest rate is kept unchanged.

– Norges Bank’s headache now

The big question is what Central Bank governor Ida Wolden Bache will say about the interest rate range since the last meeting on 22 March – will she raise the interest rate range?

– It is not more than a month since the last interest rate meeting, where we were hinted at a rate cut in September. But since then, the krone has weakened by 2.5 per cent against the “exchange rate index I-44”, which are Norway’s most important trading partners.

– Will the governor of the central bank say that “things have developed roughly as expected” or will she say that the weakened krone exchange rate, increased wage growth and increased market interest rates around the world are pushing the interest rate curve out. It is Norges Bank’s headache now, according to Knudsen.

Important figures from the US on Wednesday evening

On Wednesday at 20 Norwegian time there is an interest rate meeting for the FED, the American central bank.

Senior strategist Dane Cekov at Nordea Markets tells Nettavisen that the krone’s record weakening is connected to that:

– That the krone is so weak is mainly due to expectations that the US central bank will signal tonight that interest rate cuts must be delayed on the basis of higher inflation figures than the desired better macro data.

Cekov explains that the price of oil has fallen from 89 dollars a barrel to 85 dollars a barrel. In sum, this means that the dollar has strengthened while the krone has weakened.

On Monday afternoon, the inflation figures came from the US, which showed a price rise above expectations: the annual increase in inflation is now 2.7, while core inflation is 2.8 per cent.

– No interest rate cut

– It is a confirmation that growth and activity in the USA is so high that there will be no interest rate cuts this year, said chief economist Elisabeth Holvik in the Sparebank 1 group to Nettavisen.

It was not long ago that the FED hinted at seven rate cuts this year:

– The risk that they will have to raise interest rates has now increased. This is dramatic for the capital market, which is experiencing capital being moved to the USA. If you have debt in dollars, it will be very expensive. This is difficult for Norges Bank: The krone is now under pressure.

also read

Interest rate bomb from the USA – top bank warns Norwegians with mortgages

– Bad news

Central bank governor Ida Wolden Bache’s belief in an interest rate cut in September is far less certain now:

– An interest rate cut in Norway before the US could weaken the krone further. This is bad news for anyone who wants an interest rate cut here as well. The governor of the central bank will probably have to comment on this at the next interest rate meeting, said Holvik.