The central bank has decided to raise the key interest rate by 0.25 percentage points to 2.5 per cent. – There is high activity in the Norwegian economy, and unemployment is at a historically low level. Price inflation has risen further and is clearly above our target of 2 per cent. We raise the interest rate to curb price inflation, says Central Bank Governor Ida Wolden Bache in the announcement. It states that the key interest rate will most likely be raised further in December. – Many are now experiencing how demanding it can be with rapid and unexpected price increases, adds Bache at the press conference. The central bank is still concerned about the rise in prices. Photo: Stian Lysberg Solum / NTB – Becoming less luxury An increase in the policy rate is usually followed up by the banks increasing the interest rate on mortgages. Asbjørn Sortevik Skodjevåg is building his dream house at Svorta in Ålesund. Over the New Year, the family of four will move in, but the interest rate increases will be felt. – There will be less luxury, says Skodjevåg. In addition to the interest rate increase, the building costs have increased by NOK 700,000, but for the father of the family, the interest rate increase does not come as a shock. – There are large sums of money here, but we have not been naive. We knew this was coming. The interest rate has been low for a long time, so we have assumed that there will normally be a higher interest rate. Going forward, the family will plan their everyday life better, and think about how they can save money both on food purchases and activities. – We have to come up with things that don’t cost money, he says. Asbjørn Sortevik Skodjevåg looks beyond his view – the thing in the house that is free. Photo: Josef Benoni Ness Tveit / news House price fall While interest rates are still on the rise, figures for October show a clear fall in house prices. House prices fell last month by 1.9 per cent. Adjusted for seasonal variations, prices fell by 0.8 per cent. – We haven’t had such a strong price drop in October since October 2008, i.e. the year of the financial crisis, says Henning Lauridsen. The managing director of Eiendom Norge says the price drop is mainly due to the fact that interest rates have been raised sharply throughout the year. Henning Lauridsen is managing director of Eiendom Norge. Photo: Beate Oma Dahle / NTB So far this year, house prices have risen by 4.7 per cent, down from 6.7 in September. – We expect that we will go down towards around zero percent price growth this year, and that means we will have to go down a few percent more, says Lauridsen to news. – We expect that we will have a weak market as long as interest rate increases continue, and perhaps that the first growth will come in the autumn or after autumn next year. As of now, he is not afraid of a housing crash. – I am not at the moment, but if we were to go too far before we have seen the effects of the previous interest rate increases, then this could drag the housing market down unnecessarily. Will overcome the price rise September was the last time the policy rate made a jump, to 2.25 per cent. It was the sixth time it had been staged in a year. – From September last year to September this year, consumer prices rose by almost 7 per cent. Energy prices are one important explanation for the high price increase, but prices are rising rapidly for a wide range of other goods and services, says Bache. High price growth has led to the central banks in several countries raising the key interest rate further in recent weeks. Policy rate The policy rate is Norges Bank’s most important tool for stabilizing price growth and development in the Norwegian economy. The key interest rate in Norway is the interest that the banks receive on their deposits in Norges Bank up to a fixed amount – a quota. The key interest rate and expectations about future developments in the key interest rate primarily affect the interest rates between banks and the interest level the banks offer on deposits and loans to their customers. Market interest rates in turn affect the krone exchange rate, the prices of securities, house prices and the demand for loans, consumption and investments. Source: Norges Bank During the corona pandemic, which led to the biggest setback in the Norwegian economy since the war, the key interest rate was lowered to a record low of zero. Only in September last year did it turn around. After Ida Wolden Bache took over as governor of the central bank this spring, she announced that interest rates would rise further. In June, August and September, the central bank decided to raise interest rates twice. Then it was adjusted by half a percentage point each time. The aim has been to curb price inflation. – The high price increase weakens households’ purchasing power, and makes it difficult for both businesses and households to make financial decisions, says Bache. The governor of the central bank acknowledges that the interest rate hikes may be demanding for some, but says that most Norwegian households have the finances to handle increased expenses. There may be another increase in December In the interest rate decision on Thursday, it is stated that inflation has increased more than expected, and that the labor market appears to be slightly tighter than previously assumed. There are also signs of cooling in parts of the economy. “The interest rate has been raised a lot in a short time, and monetary policy is starting to have a tightening effect on the economy. This may mean moving forward more gradually in the interest rate setting,” says the interest rate decision. – Norges Bank’s task is to ensure low and stable inflation. At the same time, we must contribute to ensuring that as many people as possible are in work, and to stable, economic development over time, says Bache. Norges Bank may raise the key interest rate further in December. Photo: Stian Lysberg Solum / NTB The decision on the key interest rate is taken by Norges Bank’s committee for monetary policy and financial stability. They consider it so that it will most likely be set up next month. – In the discussions, the committee has been concerned with balancing the risk of tightening too much against the risk of tightening too little. If we do not raise the interest rate enough, there is a danger that inflation will take hold and that later there will be a need to raise the interest rate even more to bring down price growth, says the governor of the central bank. At the same time, it is reported that there is greater uncertainty about the outlook than normal. Future decisions will depend on economic developments.
ttn-69
Norges Bank to set interest rates in November – news Norway – Overview of news from various parts of the country
