Photo: ROAR HAGEN
Suddenly there was reason to dream of an ever so small “Christmas present” from Norges Bank.
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The bad news for the wallet has been so numerous and has lasted so long that it has become a habit to steel oneself for ever tighter times.
The cold sweat has increased every time Central Bank Governor Ida Wolden Bache has approached a microphone. The message behind the serious mine has been the same: Interest rates will go up, up, up.
But now there may be something as unusual as happy news in the making. Nothing is to be collected in advance, but interest-rate-hungry Norwegians can for the first time in a long time hope for new tones from Norges Bank. This is because the arrows for the latest inflation figures are finally pointing clearly in the direction we need them to do.
The price development of food and electricity helps to curb inflation. Photo: Aurora Ytreberg Meløe / VG
When the key interest rate was raised from 4.0 to 4.25 per cent in September, the governor of the central bank announced at the same time that another interest rate jump was likely. And probably in December.
Although it takes time before we notice the effect of each interest rate hike on the private economy, there was something symbolic about the thought of yet another terrifying news just before Christmas rings in.
Now several economists believe that the interest rate increase can in all probability be scrapped.
The fact that inflation has moderated to 3.3 per cent for the last twelve-month period is a long step in the right direction. In August, the corresponding figure was 4.8 per cent. Core inflation, which is price growth without tax changes and energy included in the calculation, has also moderated more than experts assumed.
In particular, it is the price development of food and electricity that is helping to pull price growth markedly downwards, towards a level that could cause Wolden Bache to put the interest rate weapon on hold for the time being. In any case, it is good news for the wallet that price inflation is on the way down.
Economists believe central bank governor Ida Wolden Bache may end up canceling the announced interest rate increase in December. Photo: Frederik Ringnes / NTB
There has been no way out but to raise interest rates quickly and brutally, in order to counteract inflation.
At the same time, the interest rates we are now approaching, if the trajectory continues upwards, will quickly create difficulties for many Norwegians. If the costs reach the breaking point, it is only a short way to put away luxury habits, plan food purchases better and tighten the belt where it can be tightened.
The reason why many people are now starting to sweat is due to more factors than just the interest rate itself. Historically speaking, the interest rates we now have in Norway are not that incredibly high. But if we put interest rates in the context of how indebted the population has become, the combination quickly becomes downright brutal.
For example, many young first-time buyers had never experienced anything other than low interest rates when they entered the housing market. There are probably many who did not take seriously the warnings that low interest rates are neither a matter of course nor a human right, and thus were not sufficiently prepared for how hard interest rate increases can actually bite.
In retrospect, one can ask whether international conditions led to the fact that we had lower interest rates in Norway for a long time than our economy strictly speaking benefited from, and that what we are now experiencing is a cold shower as a result of an awful lot of redundancies.
But at best, the temperature is finally stabilizing at a more predictable level, where we can hope that the rate hike will stop for now.
And just feeling the rush of hope feels good after such a long stream of bad news.
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Published: 10.10.23 at 15:07
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2023-10-10 13:07:49
#Comment #hope #hope #interest #rate
