LO leader slays rate hike twice: – It is incomprehensible

in a new way TV interview 2 Volsvik rages against the central bank’s decision to raise the interest rate by 0.5 points. She believes the decision harms the daily lives of businesses and individuals, and warns that Norway could “take a big hit” if interest rates continue to increase.

– It is incomprehensible that the central bank governor will continue the sharp interest rate race, Hessen-Volsvik tells TV 2, and adds:

– If people and companies are pushed off a cliff, we won’t have control over the economy, she adds.

unacceptable

The LO leader criticized Norges for using rising unemployment as a way to combat the economic situation.

– We cannot accept that the Norwegian Bank is once again using rising unemployment as a tool of economic policy. And I cannot take responsibility for the formation of reasonable wages in this country, if the central bank governor will continue his sharp increases in interest rates, Hessen-Volsvik tells the same newspaper.

Volsvik points out that Norway has one of the lowest unemployment rates in Europe, and this is due to the tripartite cooperation between companies, unions and the state.

– We have taken the Norwegian model into crises before, and will do so again. Then we can’t have a Chief Justice on Bankplassen, who runs his own race. I remind you that Norges Bank must also take employment into account when setting the interest rate, says the LO leader of TV 2.

coming from abroad

LO chief economist Roger Bjornstad explains to DN why the association believes “an interest rate increase” is unnecessary.

Interest rate increases were very aggressive last year without having any significant impact on price growth. This is because inflation comes from outside. Instead, interest rate increases only affect the Norwegian domestic economy.

There is no agreement among economists as to how much the interest rate should rise, and what are the underlying causes of inflation. One camp in the debate believes that a significant increase in interest rates is needed to slow the domestic economy, put an end to the krone’s depreciation and bring down inflation.

The other camp believes that inflation is caused by external conditions such as the pandemic and the war in Ukraine, and that a serious interest rate hike will only lead to a hard landing as central banks have to cut rates again very soon.

Bjørnstad believes that higher interest rates at Norges Bank affect the economy of companies and individuals without having any particular impact on the underlying causes of higher prices for food, energy and other things. Instead, he believes Norway should mitigate the economic impact of foreign inflation through three measures.

There are three tools that must work together to stop the negative consequences of imported inflation. In such a situation, the interest rate must focus on employment, wage formation must maintain the competitiveness of the industry and must protect the weaker national budget and prevent negative consequences. The aim is to create good development in the Norwegian economy, maintain wage composition and enhance competitiveness.

– What level does the LO think Norges Bank should set the interest rate at?

– We do not specify what the interest rate level should be, but we say when we think it could harm the economy and the labor market