High price growth has plagued Norges Bank for two years, with 12 interest rate hikes as a result. There are now many indications that the interest rate peak will soon be reached. The question is what comes further forward. Chief economist Kyrre M. Knudsen at Sparebank1 SR-Bank has looked into the glass ball. – It is very likely that we will have a recession in Norway before too long. And it may well be that concern about a sudden recession will take over from the concern we have today about high inflation. The major concern is a combination of high interest rates at the same time as unemployment rises, says Kyrre M. Knudsen in Sparebank1 SR-Bank Photo: Mathias Oppedal / news Recession means economic decline, and that value creation falls for at least two quarters in a row. SR-Bank mostly believes in a mild recession, where it is heading towards what economists like to call a soft landing. Then the economy slows down without unemployment rising much. The real economic specter is called stagflation. 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. Higher interest rates mean increased expenses if you have a mortgage 2021 2022 2023 2024 2025 2026 Forecast Norges bank – The big concern is that a recession will be steep. And that it gives a big rise in unemployment. If you combine that with the fact that inflation will not come down, then Norges Bank is a bit of a checkmate, he says. In such a scenario, the central bank must keep interest rates high at the same time as unemployment rises and people lose their jobs. – It is a so-called stagflation scenario. Although we are not so afraid of it right now, it is something we worry about, he says. Chief economist Jan L. Andreassen in the Eika group predicts that the government will intervene with increased oil money spending if there is an economic downturn in Norway. Photo: Johan B. Sættem Norwegian economy loses momentum New figures from Statistics Norway this week show that price inflation fell sharply in August, largely due to cheaper electricity. Much of the same happened in July. Before the weekend, new estimates for the economic development for the Norwegian and international economy came out. The report showed that the agency expects the economy to cool more this year than when it presented its previous economic analysis – Inflation fell more than expected, the same applies to trade, unemployment is up slightly and house prices have been flat for a while. There are many things that point in the direction of calm in the Norwegian economy going forward, he says. 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. Recent figures from Norges Bank’s regional network show that companies expect growth to slow down towards winter. The major banks DNB and Nordea predict that the expected interest rate jump next week will be the last from the central bank, and that the interest rate peak has thus been reached. – Households have had it unnecessarily tough But Jan L. Andreassen, who is chief economist in the Eika group, has no faith in any recession scenario. He believes that in that case the government will greatly increase the use of oil fund money – in order to increase the chance of securing re-election in 2025. Most Norwegians have now been through a very difficult period economically, which has been completely unnecessary because the treasury is overflowing money, is his analysis. – The government is going to spend a lot more oil money, on tax breaks, on salary and social security settlements to ensure the best possible probability of re-election in 2025, says Andreassen. And believes that the best thing the government can do is cut VAT on food. Finance Minister Trygve Slagsvold Vedum has had the opportunity to comment on the claim that the government will have to use more oil fund money going forward, and has declined. – But now Norges Bank has been fighting against high price growth and inflation for a long time. Won’t such a fiscal policy then fuel inflation again? – No, I don’t think that we will get high price growth from housewives going completely wild on the nappy shelves in grocery stores, he says. – People do not suffer unnecessarily without wanting to change the government, he says.
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– Will soon talk more about recession than inflation – news Norway – Overview of news from different parts of the country
