Waiting for high interest for several years – E24

Jan L. Andreessen changes his view on interest rates after oil revenues flow into the state. Chief Economist Marius Gunsholt Hof believes the Norwegian central bank’s fight against inflation will be “long and difficult”.

On Thursday, Norges Bank will announce its new interest rate decision, and economists expect the central bank to raise its key interest rate another notch, from 4 to 4.25 percent.

Chief Economist Jan L. Andreessen has long stood against the grain, defending low interest rates and criticizing several of the Norges Bank’s interest rate hikes.

Now he has changed his view on the interest rate.

– I think that we in Norway are now facing the problem of welfare. The oil price exceeded NOK 1,000 per barrel. That’s an insane amount of money. Now we return to what we thought we had left behind, which is the era of systematically increasing use of oil money as much as the economy can handle.

The price of oil exceeded $95 per barrel this week, while the price of gas remains higher than usual historically. the government It expects more than $1,000 billion in oil and gas revenues to the state this year, and that 714 billion will be added to the oil fund.

Andreessen believes this means increased public spending in the future, and that this means several years of higher interest rates.

– Let’s see where we were. We were tight Financial policyFinancial policypublic expenditure There is no need for high interest rates. But now we must adapt to a world of rising interest rates.

– It is consistent with Verb baseVerb baseThe rule of procedure limits the government’s annual use of oil funds to three percent of the value of the oil fund over time. “We have no chance of using three percent of the fund anyway,” Andreessen says.

He believes that it will be difficult to curb spending in light of rising oil revenues.

– Every time there is a jump in unemployment rates, politicians hand out money. For every day that oil prices rise, the odds of this scenario occurring increase. There will be plenty of money for politicians to sit on.

I think the door is open to raise interest rates permanently

Ahead of the Norges Bank interest rate meeting, the question was whether peak interest rates had been reached now that the central bank has raised them sharply to combat the highest rate increase in decades.

Chief strategist Erika D’Alsto believes Norges Bank remains concerned that price growth will accelerate again, or that the krone will weaken, even though companies are reporting weaker growth in the winter and unemployment is starting to rise slightly.

– You want to keep the door a little open, both so as not to give wrong signals to the market so that the krone weakens, but also because you are not really sure about the inflation outlook.

– The peak of interest rates has likely been reached, but the door is open for another increase at the end of the year, she said.

Chief Economist Marius Gunsholt Hof also points to interest rates internationally, where there could be further increases from central banks in the US, eurozone, Sweden and the UK.

– It is not a given that any of them will be at the peak of the interest rate.

Price growth has moderated, both in the United States of America and in Norway. Olaf Chen at Storebrand warns that higher oil prices could mean a new round of stronger price growth in the US economy.

– The decline in the US inflation rate from nine to three percent is largely due to energy prices. Energy prices had peaked at this time last year.

– In the past three months, the actual price of oil has increased. I think this effect has been underestimated.

Chief Economist Kirsty Hoagland assumes that Norges Bank will keep interest rates at a high level until the end of 2024.

Hoogland believes that figures on private consumption, house prices and the Norwegian economy in general show that interest rate increases are painful, but they are a far cry from “brutal deflation”.

– The Norwegian economy can afford a higher interest rate than we thought. “It has to do with the fact that wage growth is high, and we had savings during this period when the key interest rate fell from zero to four per cent,” she says.

But then core inflation will be high for a long time as well, Hof says.

He says the road to Norges Bank’s target of 2 per cent price growth will be “long and difficult”.

-We see that the pressure in the labor market has not decreased further and salary expectations are very high. Then interest rates will also remain high for a long time.