The krona is historically weak during the day. You have to go almost all the way back to the pandemic in March 2020 to find a weaker krone measured against the major currencies such as the euro and dollar. The panicked financial unrest in recent days has weakened the krone further. Now the euro costs over 12 kroner and the dollar over 11 kroner. – What we know is that when there is unrest, the krona weakens, says Chief Economist Elisabeth Holvik at Sparebank 1. Chief Economist Elisabeth Holvik believes it may be necessary to raise interest rates again. Photo: William Jobling / news Holvik fears that if the devaluation of the krone and the financial turmoil continue, it could lead to Noregs Bank being forced to raise the key interest rate. – It may be necessary to raise interest rates As of today, Noregs Bank’s mandate is to ensure that inflation is close to 2 per cent. To achieve this, the bank has only one tool, and that is the policy rate. The krone exchange rate affects inflation in this country, as many of the goods we use come from abroad. When the krone exchange rate is weak, it becomes more expensive to buy in goods, which in turn leads to higher prices for customers. – Norges Bank has no choice if they are to secure the inflation target. It is forced to react if the krone continues to weaken. Holvik also points out that wage formation is affected by the exchange rate of the krone due to the frontline model. This is because the krone exchange rate affects the competitiveness and costs of the export industry, which in turn affects how much salary they can offer. It is central bank governor Ida Wolden Bache who decides whether interest rates should rise or fall. Photo: William Jobling / news – If the devaluation of the krone becomes too great, they may have to raise the interest rate. The next interest rate meeting will be on 15 August at Arendalsveka. It is expected in advance that Norges Bank will keep interest rates unchanged. – Can we get an interest rate hike already in ten days? – No, as it looks today, it will continue to be announced that someone will raise the interest rate, says Holsvik. – Thinks Noregs Bank has ice in its stomach Head of allocation and global interest rates at Storebrand Olav Chen is open to Noregs Bank raising interest rates. – You cannot control inflation in Norway if you do not have control over the krone exchange rate. And then the only remedy is actually to raise the interest rate. So it is not unlikely, he says. But still, he thinks Wolden Bache would rather delay lowering the interest rate than raise it. – I think Norges Bank will have ice in its stomach. Olav Chen at Storebrand has long feared that a stock market correction will weaken the krone exchange rate. Photo: William Jobling / news Chen believes that the financial turmoil we are seeing now may be a slightly exaggerated fear after a long period of optimism. – This is exactly the situation I have feared for a long time. You get a small correction or turmoil in the stock markets, then there is strong pressure on the Norwegian krone. – The krona is a small peripheral currency. When we see such a correction as this here, the krone is thrown between the walls. Published 05/08/2024, at 15.38
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Crisis-weak krone – thinks Noregs Bank must raise interest rates – news Norway – Overview of news from different parts of the country
