Norges Bank thundered on with another interest rate hike on Thursday, and the key rate is now at 4.5 per cent. This means that the vast majority of us will now receive a mortgage interest rate of around 6 per cent. And not only that; central bank governor Ida Wolden Bache is also open to another interest rate hike next year. This could happen if cost growth stays up or the krone becomes weaker than forecast. In other words: an imminent interest rate cut is not exactly what she thinks most about right now. Ida Wolden Bache does not budge an inch: “As the committee now assesses the outlook and the risk picture, the key interest rate will probably be kept at this level for quite some time to come,” writes Norges Bank in its press release. Many hoped it was over Before the interest rate meeting, there were several who believed that we had reached the interest rate peak at the previous interest rate meeting, and that Norges Bank would soon begin its downward spiral again. Bache responds harshly to these predictions, both through today’s interest rate announcement and the way she describes the decision: – There will probably be a need to keep interest rates up for quite some time to come in order to get price growth back to the target within a reasonable time, she emphasizes. Thus, she stands her ground, even though figures from her own regional network last week indicate that a cooling of the Norwegian economy is underway. In addition, the latest figures for price inflation show that it is in the process of coming down, although it is well above the target of a price increase of 2 per cent. Many industries feel it The interest rate hike also comes despite the fact that some industries are now experiencing increased unemployment, with the building and construction industry leading the way. New home construction has been greatly reduced in the past year, a consequence of all the interest rate hikes. Still, perhaps we shouldn’t be too surprised that Wolden Bache is keeping a tight line. Because even if there are signs of lower price growth, the weak krone exchange rate is a bad headache for the bank. It contributes both to keeping wage and price growth up, both through imported goods and through the profitability of the export industry. The weak krone is a huge headache for Norges Bank. Photo: Berit Roald / NTB scanpix If she lets up too soon, she risks the krone exchange rate weakening even more – and price inflation shooting up again. She wants to avoid that at all costs. Two tough years The first interest rate cut will come in the autumn at the earliest, and then possibly after the interest rate has been raised once more. This means that those of us who have mortgages will not notice any form of relief until 2025. And even well into 2026, our mortgage interest rate will probably be around 5 per cent. The fight against rising prices is going to be tough for the private economy. Today, the head of the central bank leaves no doubt whatsoever: she will not give up until she wins it.
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Hard line from Norges Bank – Statement
