We all feel it on our wallets. It is no longer just a feeling, the speech of the numbers is clear: everything just gets more and more expensive. We received the year’s provisional highest figure for price growth on Wednesday morning. The summary shows that in one year, from July last year to July this year, prices have risen 6.8 per cent. Then it is also appropriate to remind that Norges Bank governs according to a target that price growth should be around 2 per cent over time. Now we are miles ahead. Prices are rising everywhere The rise in prices is across the board, but the most dramatic is the rise in food prices. Food prices have risen by 10.4 per cent in one year. Food prices rose the most. Photo: Pål Tegnander / news This means that if you and your family spent NOK 11,000 a month on food last month, you spend NOK 12,100 now. As usual, there is also high price growth for energy. The price of electricity including network rent was up 18 per cent from July last year to July this year. The electricity subsidy for households helps, and Statistics Norway points out that the Norwegian price increase would have been 8.9 per cent if it had not been for the electricity subsidy. Interest rates will rise sharply Unfortunately for all those who have mortgages with floating interest rates, which is the vast majority of us, today’s figures mean that we will have less and less to worry about in the years to come. We will spend an increasingly large part of our salary on interest payments. Norges Bank is only in the starting pit of what will be a long series of interest rate hikes going forward. The next interest rate hike in the calendar comes as early as next week. Two doubles may come Before the summer, central bank governor Ida Wolden Bache struck with something as unusual as a double interest rate hike of 0.5 percentage points, and in addition almost gave an interest rate hike guarantee in August. Then she announced “only” a normal interest rate hike of 0.25 percentage points, but with today’s price growth figures, it is not entirely unthinkable that she will agree to another double interest rate hike. Raising the interest rate is the most effective tool you have against galloping prices. Several banks, such as Handelsbanken and DNB, are also not ignoring the possibility of a double interest rate hike in both August and September. Two double interest rate hikes before the autumn holidays, in other words. Altogether, this gives one percentage point higher interest, which actually means over NOK 3,000 more per month in interest expenses for a loan of NOK 4 million. Everyone with a mortgage gets a tighter harvest. Photo: ANDERS FEHN Unusual and sensational It will be both unusual and sensational. But probably necessary. Because it is not just price inflation that is high in Norway now. The Norwegian economy is boiling. It is almost impossible to get hold of people. The combination of a tight labor market and high price growth will naturally also only result in higher wage growth. The framework for wage growth in the frontline profession of 3.7 per cent, which was agreed in April, will most likely be blown up again by the private sector – which is racing to attract people. Tempting people with higher wages to get them to change jobs is an effective tool. And even if you are not in the market to change jobs, the rapidly growing prices and job opportunities will otherwise be a good argument in the salary negotiations with the boss. This will result in wage growth. This in turn will contribute to higher prices, which in turn will put pressure on wages. Also known as a wage and price spiral. It is a type of spiral that Norges Bank is very concerned about, and which forces a stronger and earlier tightening than they had envisaged before the summer.
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Now we can get two more double interest rate hikes before the autumn holidays – Statement
