Norges Bank has raised the interest rate at every single meeting since May last year, but now the central bank is keeping the interest rate unchanged at 2.75 percent.
But they consider that there will be a need to raise the interest rate in two months.
– The further course of the interest rate will depend on the economic development. We will most likely raise the interest rate in March, says Central Bank Governor Ida Wolden Bache.
Not surprised
Ahead of Thursday’s interest rate decision, a majority of Norwegian economists expected that Norges Bank would take an interest rate break. One of them is consumer economist Cecilie Tvetenstrand at Storebrand.
– Now we are starting to see the end of interest rate increases. We have to expect a small increase in our loans, but now we are starting to see how much we will get in costs going forward, says Tvetenstrand.
SOFT LANDING: Cecilie Tvetenstrand, consumer economist at Storebrand, hopes that the interest rate break can lead to a soft landing for households. Photo: Frode Sunde / TV 2
Norges Bank will now monitor the development, but is clear that the interest rate will be raised once more in March, says Tvetenstrand.
– They look at how the interest rate affects our consumption. If consumption goes down, they have achieved what they want. Hopefully this will cause price inflation to fall, says Tvetenstrand.
– A breather
Debt specialist at Bank2, Sebastian Mikolajczyk, says that they feel that their customers need a break from interest rate increases.
TOUGH INTEREST RATE PRESSURE: Debt specialist Sebastian Mikolajczyk at Bank2 believes that more people will have psychological problems as a result of higher interest rates. Photo: Nanna Wessel Sundt / Bank2
– It is wise for Norges Bank to keep the interest rate unchanged. We have had an increased number of applications for exemption from installments from our customers. Today’s decision gives people a breather and time to adapt to the new economic everyday life, says Mikolajczyk.
Can reach 3.25 percent
The state of the Norwegian economy is good and most people are in work, says chief economist Kjetil Martinsen at Swedbank. Nevertheless, he believes that could soon turn around.
– Inflation is far above Norges Bank’s target, and is the main reason why they have raised interest rates. They will most likely raise the policy rate to 3 per cent in March, says Martinsen.
Martinsen does not think we have reached the interest rate peak, and thinks we can reach an interest rate of 3.25 per cent in June.
– Norges Bank is trying to balance a cooling of the economy while inflation, and in particular core inflation, is still too high. There is great uncertainty about how strongly interest rates will work and when the household has “used up” funds saved from the pandemic years, says Martinsen.
– The interest rate remains unchanged in March
Chief economist Frank Jullum at Danske Bank, on the other hand, expects the interest rate to remain unchanged in March, at 2.75 per cent.
– We believe that we are at a turning point in the economy, and that consumption will slow down and unemployment will begin to rise. We therefore still expect Norges Bank to keep interest rates unchanged in March.
REACHED THE TOP: Chief economist at Danske Bank, Frank Jullum, believes we have reached the interest rate peak. Photo: Danske Bank
Norges Bank has a target for core inflation, which measures price growth excluding electricity and tax changes, to fall to 2 per cent. Now it is up to 5.7 percent.
But for that to happen, among other things, unemployment must begin to rise, explains Jullum.
“Alternatively, inflationary pressure must be somewhat lower than was expected in December,” says Jullum.
