– Coupled with the decline in house prices, which has been larger than expected, it may seem that interest rate hikes are now starting to bite into the economy. We therefore believe Norges Bank will stick to its plan to hike interest rates by an additional 25 basis points at its December 15 interest rate meeting, Danske Bank chief economist Frank Jullum told Nettavisen.
He also says his bank has changed his expectations. Danske Bank insists that interest rates will peak at 2.75% and that there will be no interest rate hikes next year.
He is supported by his fellow Chief Economist Kyrre M. Knudsen at Sparebank 1 SR-Bank:
– I believe Norges Bank will hike interest rates to 2.75% on Thursday, in line with signals from the previous rate meeting. This will be as expected. There is heightened tension related to Norges Bank’s interest rate path and assessments of the economic outlook, including inflation and wage growth.
also read
Norwegian Economy Report: This worries NHO
I believe interest rates will peak in January
Knudsen also believes we are nearing peak interest rates, but unlike Jullum, he believes peak interest rates will be reached in January.
– For much of the autumn, the market was pricing in an interest rate higher than Norges Bank’s range of interest rates. However, Norwegian interest rates have recently fallen so much that the market is now pricing in a maximum interest rate of 2.75%.
The interest rate path is Norges Bank’s forecast of how interest rates will move over the next few years. It is therefore the forecast for the future evolution of the reference rate.
For his part, Knudsen believes there are good reasons why Norges Bank will keep its interest rate path roughly unchanged from last time out.
– Some conditions drag down. Second top. We therefore expect the peak in interest rates to be 3 percent and to be reached in January.
He goes on to say that several factors such as growth and international interest rates are lowering the path of interest rates. On the other hand, inflation in Norway was higher than Norges Bank estimates.
– Norges Bank will probably increase its inflation estimate for 2022 and probably even slightly for 2023. The latter will also help Norges Bank slightly increase wage growth. These conditions lift the path of interest rates, he concludes.
also read
Market interest rates are collapsing: they could rise by a quarter
Highest level since 2009
In early November, Norges Bank raised its interest rate by 0.25 percentage point to 2.5%. This is the current level of interest rates and the highest level since 2009.
The official interest rate is the interest that banks receive on their deposits at Norges Bank. This was the sixth rate hike since September of last year.
However, not all borrowers have noticed the many interest rate hikes in their portfolios yet. When the benchmark interest rate is raised, banks have to signal that their interest rates on, for example, mortgage loans are also being raised, before customers can be notified.
Once customers have received the information, it usually takes six weeks for the interest rate increase to take effect.
