There have been turbulent times in the financial markets in recent weeks. The specialized Silicon Valley Bank (SVB) has been shut down by the authorities, causing turmoil in the banking sector around the world.
At the same time, Norwegians’ wallets have already been through a “perfect storm” with frequent interest rate increases, exorbitant electricity prices, unpredictable petrol and diesel prices, and record high inflation.
A new survey by Santander Bank shows that six out of ten Norwegians worry about their finances to one degree or another. 30 per cent say they can to a small or very small extent afford unforeseen expenses if price increases continue.
On Thursday, the Bank of Norway will make a new interest rate decision. Can Norwegian governors expect another rate hike?
– Not responsible for raising the interest rate
Jan Ludwig Andreessen advises the Bank of Norway not to raise interest rates now.
– Given the current risk picture, it is irresponsible to raise the interest rate now. It is very unstable. A mistake at one central bank or another somewhere has global implications, Andreessen tells Nettavisen.
The chief economist also notes that most forecasts have taken a surprising turn after the turmoil that characterized the markets last week.
You’ve gone through drastic changes. Not only did one bank fail (note the Silicon Valley bank), there are also weak numbers from China. In the past two weeks, the future valuation has changed dramatically in the interest rate market.
Sharp drop in interest rates
Many experts around the world now believe that fewer interest rate increases and faster interest rate cuts.
– With the international turmoil, it is estimated that the US interest rate will drop to 2.5 percent, the European interest rate to 2 percent and Norway interest rate to 2 percent by December 2024. There is a violent decline in interest rates in all markets.
Andreessen believes the question now is whether the Norges Bank, the Bank of England, and the Fed would “interest” in taking the eventual increase. He himself believes that this is superfluous.
None of these countries need to raise interest rates. I don’t know what they want to highlight, says Andreessen.
A new stage of revision image
If Andreessen is right, then Norwegian borrowers can look to the future.
– There is a new stage in the form of proofreading. We’re going down. Andreessen says that people are starting to price in interest rate cuts where they previously priced in interest rate increases.
If market predictions are correct, Andreassen says, what we’ve seen now is just a problem.
– or bank flu. They get healthy and fast over time.
In the worst case scenario for the Norwegian mortgage borrower’s portfolio, it’s another quarter to come, the chief economist predicts.
It is difficult to reduce inflation
Petter Slyngstadli, Head of Analysis at Norne Securities, supports the latter theory.
I am confident that there will be a hike in interest rates this week. 25 basis points is what I believe in, Slingstadley tells Netavien.
At the same time, he understands that this is a challenge for the central bank.
The development in Sweden is worrying, with inflation at 12 percent and a sharp decline in housing prices. The Norwegian and Swedish krona are among the weakest currencies in the world, and if the Riksbank (and the European Central Bank) becomes more aggressive in interest rate policy than the Bank of Norway, this will affect the Norwegian krone, and when we know that most of the imported inflation rates are in both Norway and Sweden, this may Means it will be difficult to reduce inflation.
Slingstadli also wonders if the Bank of Norway will dare to concede three percent.
– I think it is dictated by international conditions. The banking crisis is a factor here. Today, the market believes that we are close to the peak of interest rates in Europe and the United States. If the banking crisis breaks out, and inflation stays high, and wage adjustment becomes too expensive, I think 3.5 to 4 percent.
– Not resolved by the Norwegian interest
In addition, Slyngstadli asserts that higher energy prices have a similar effect.
Energy prices look like an interest rate. At the same time, retail, home prices and auto sales are better than expected. But inflation is a global problem, and it is not primarily solved by Norwegian interest rates, Slingdstadley points out.
However, it does point to another move that may have an impact on inflation.
It would probably be more effective for inflation to suspend kroner sales to the oil fund in anticipation of a stronger kroner. It may also make sense from a managerial point of view. The krone is very weak and this contributes to high inflation. But – still inflation in Norway is much lower than, for example, in Sweden.
You can’t afford unexpected bills
As mentioned, many Norwegians are concerned about their finances in these times. Norwegians under the age of 40 stand out in the Bank Santander survey.
– This is an age group that is largely characterized by incorporation, young children and large mortgages. This is also an age group that has not previously experienced food prices, electricity prices, and interest expenses as high as we do today. An unexpected bill could be enough to bring the economy to its knees, says Priscilla Halverson, who is in charge of savings and deposits at Santander.
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