The Swedish central bank cuts interest rates once again on Tuesday. The policy interest rate in the neighboring country is thus 3.5 per cent, which is one percentage point lower than here at home. In Norway, the key interest rate has been at 4.5 per cent since the last rate hike in December. If you have a mortgage of NOK 4 million, you now have to pay NOK 40,000 more in interest per year here than in Sweden – before tax. It makes many people wonder why they manage to cut in Sweden, and not here? Firstly; that a country cuts interest rates is not a sign that the economy is doing well – quite the opposite. Although the interest rate in Sweden is still at a level that has a somewhat restrictive effect on the economy, the plan is for it to further decrease to 3 per cent during the year – possibly lower. Interest calculator The calculator uses the formula for annuity loans to calculate your monthly costs. Nominal interest is used here. This means that there will be an additional transaction fee which will vary from bank to bank. Today’s interest rate is taken from DNB’s mortgage interest rate for young people, and different banks will have different interest rates. The figures given here will therefore be approximate for you. Monthly expenses are interest and repayments combined. Read more about sources and reservations here. See how much you have to pay if the interest rate increases. The major differences between the Norwegian and Swedish economies are primarily three things: Price growth Swedish price growth has come down a lot, and is now very close to the target of a price increase of 2 per cent. In addition, both producer prices and the price expectations of businesses are now at a level that indicates an inflationary pressure that is compatible with the inflation target, according to the Riksbank. This therefore reinforces the picture that inflation is in the process of stabilising, and that the risk that inflation will once again accelerate has become even lower. In addition, the Swedish unions have agreed to far more moderate wage settlements than in Norway. This brings down price growth more quickly. The salary settlements have been agreed for several years. This means that the Swedes do not get real wage growth. This is in stark contrast to the Norwegian wage settlement. Although price inflation in Norway is on the way down, and is around three per cent, it can be demanding to get the last percentage point in place. Norges Bank said last week that even though price inflation has fallen a lot from the peak, high growth in companies’ costs will probably slow the further decline. The high costs are linked, among other things, to increased labor costs. In order for Norges Bank to start cutting interest rates, they must be confident that the risk of inflation rising again is very low. We are not there yet. Growth in the economy The Swedish economy is now at rest. In June 2024, economic activity was at the same level as June 2022 – that is, the economy is stumbling, according to Swedish statistics authorities. Sweden had a few months of growth in January and February, before a weaker spring. The Swedes are still spending less money in the economy, which the retail trade is clearly noticing. The lower spending is connected, among other things, to the high interest rates. The Norwegian economy is in a period of weaker growth, but there is still growth. In 2024, Norges Bank expects the economy to grow by 1.1 per cent. The vast majority of industries are doing well, with the exception of the construction industry. Last week, new figures came out for oil investments, which are now estimated to reach NOK 257 billion in 2024. The figure is an upward adjustment of more than 4 percent, and the industry is reporting capacity problems – a clear sign of high pressure. Policy rate in percent The policy rate is set eight times a year by Norges Bank. The policy interest rate governs the interest rates in the banks, and affects your housing costs. The aim of raising the interest rate is for the high prices to come down again. The forecast tells us how Norges Bank thinks interest rates will develop in the future. Read more about sources and reservations here. A higher policy rate means increased expenses if you have a mortgage 2022 2023 2024 2025 2026 2027 Forecast Norges bank And after reporting several years of decline, companies in the retail trade expect weak but positive growth in the second and third quarters. This is linked to the wage settlement of 5 per cent, and not least also the prospect of another good wage settlement next year. Norges Bank believes that wage growth will end at over 4 per cent next year, which will help to further increase purchasing power. While Norwegians have had high wage growth last year and this year, the plan in Sweden is for the Swedes to make up for lost purchasing power only after price inflation has calmed down. Unemployment In Sweden, unemployment is now over 8 percent. Since November 2022, unemployment has risen by one percentage point, and since May 2018 it has risen by two percentage points. If you disregard the pandemic years, it is the highest unemployment in ten years. Now the growth in unemployment has stopped and is on its way to stabilising. In Norway, registered unemployment has been around 2 per cent for quite some time, which is historically low. Although the tendency is slightly increasing, we are still at very safe levels. This means that a very large proportion of the population is in work, and it is also much of the reason why Norwegian households have proven to be surprisingly robust in the face of all interest rate hikes. One of several reasons why unemployment is lower here than in Sweden is that things are going well in the oil industry – an industry that does not dominate the Swedish economy. So when will the first interest rate cut come here at home? Much depends on the weak krone, which has become even weaker throughout the summer. A weak krone means that everything we import from abroad becomes expensive, and that drives up prices. A little further down the road, the weak krone could also provide another solid wage settlement in the spring, because the export industry is going so fast. Higher wage growth could also contribute to price inflation rising again. As things stand now, the first interest rate cut will come around the New Year, either on this side or the other. Norges Bank has contented itself with stating that it will remain at “today’s level for quite some time to come”. And regardless of when the first interest rate cut comes, the next cuts will probably not come as quickly as in our neighboring country. For that, the difference in the health of our two economies right now is far too great. Published 20.08.2024, at 12.25 p.m
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Why do they cut the interest rate in Sweden, and not here? – Speech
