– In the course of two years, Norges Bank has set interest rates a whopping 13 times. We in LO have called for a clearer mandate, so that Norges Bank comes to its senses. That was said by the powerful LO leader Peggy Hessen Følsvik during the LO’s annual cartel conference at Gol on Wednesday afternoon. – It is not relevant that Norges Bank has raised the interest rate to cool down the economy. The aim is that prices in society should not rise by more than 2 per cent a year over time. LO has argued that much of the price increase in Norway comes from imported goods and services, and that higher interest rates here at home do not help as economists think. For years, LO has warned that more expensive interest rates can create trouble for companies, which will in turn lead to increased unemployment. They ask the government to intervene to slow down interest rate hikes by changing Norges Bank’s mandate. But Følsvik is flatly refused by Prime Minister Jonas Gahr Støre (Ap): – No, it is not relevant. It is fixed. That is Norges Bank’s mission, he says to news. – As part of that mandate, they must emphasize that there are many people at work. They will keep a close eye on that. It is a mandate they must follow, and that is the division of responsibilities, he emphasizes. Economist believes imported goods would be more expensive. Norges Bank is currently required to take the labor market into account when setting interest rates. Even though unemployment in Norway is close to record low levels, LO therefore believes that Norges Bank must be tightened up to take even more account of employment. Such interference from the politicians could make matters worse if it slowed down Norges Bank interest rate hikes, according to senior strategist Dane Cekov at Nordea Markets. Senior strategist Dane Cekov in Nordea Markets Photo: William Jobling / news – Because the krone exchange rate is currently weak, it appears to many that Norges Bank’s interest rate hikes are doing nothing about it. But without the interest rate hikes, the krone exchange rate would very likely have been much weaker, he explains and elaborates: – Then the goods we buy from abroad would have become even more expensive. But interest rates can lead to higher unemployment Something else that is important to Norges Bank is unemployment. In October, unemployment was at a low 1.8 per cent, according to figures from NAV. Unemployment says something about how hot it is in the Norwegian economy. If the companies have a lot to do and times are good, at some point it will be difficult to get hold of people. Economists believe it is a sign that the capacity in the economy has been blown. It can be a warning sign that prices are on the way up. The central bank will then want to calm down the economy, so that unemployment does not become so low that wages rise faster. In the next round, better wages can increase the demand for goods, so that companies raise prices. But if the central bank raises interest rates, the economy will usually cool down and the side effect is that unemployment is likely to increase. – It is not the case that Norges Bank wants people to lose their jobs. But historically, higher interest rates have contributed to higher unemployment, says Cekov. On Thursday, central bank governor Ida Wolden Bache will speak at LO’s cartel conference.
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Støre rejects LO’s hope for a brake on interest rates – will not change Norges Bank’s mandate – news Norway – Overview of news from different parts of the country
