It Would Be Madness” – E24 Warning

Eika Warns Against Rate Hike Amid Construction Slump

Jan L. Andreassen, chief economist at Eika, strongly advises against raising borrowing costs despite acknowledging that the central bank might consider it. According to Andreassen, lifting the policy rate now would be “madness.” He points to the struggling construction sector, expected drops in oil investments, and a stronger krone exchange rate as clear reasons to pause. “There is no need for a rate hike,” Andreassen states via E24, noting that current interest rate levels are already steadily dampening economic growth without additional tightening.

SEB Points to Externally Driven Price Pressure

Erica Dalstø, chief strategist at SEB, describes the upcoming decision as genuinely on the knife-edge. According to Dalstø, economic developments since the June monetary policy meeting do not point definitively toward either a hold or a hike. However, she leans toward a 0.25 percentage point increase. Higher energy prices from abroad create external price pressure, though this is currently balanced by a stronger krone and rising rate expectations among Norway’s major trading partners, such as the US and Europe, as reported by E24.

Handelsbanken Sees Persistent Inflation Challenges

Marius Gonsholt Hov, chief economist at Handelsbanken, expects Norges Bank to push rates higher this week. According to Hov, the central bank’s underlying inflation problem persists, with figures hovering in the three-percent range for two straight years. “Norges Bank is steering into a period of slightly lower activity than normal in the economy,” Hov tells E24, emphasizing that this economic slowdown is the price required to bring inflation back down to target.

DNB Carnegie Advocates Patience Until Winter

Oddmund Berg, senior economist at DNB Carnegie, believes there are solid grounds to wait and observe incoming autumn data before adjusting monetary policy. Berg expects rates to remain unchanged in September before a potential increase in December. Softer inflation figures than anticipated, combined with a stronger krone and lukewarm domestic economic indicators, give the central bank room to pause, according to DNB Carnegie’s assessment covered by E24.

Storebrand Highlights Global Rate Hike Trends

Olav Chen, head of allocation and global fixed income at Storebrand Asset Management, leans toward a September rate hike while acknowledging the high uncertainty. According to Chen, international central banks in the euro area, the US, and Japan have raised rates, creating a broader global shift. Markets now price in three additional rate hikes from the US central bank over the next twelve months, marking a stark reversal from early-year expectations of imminent rate cuts.

Frequently Asked Questions

When will Norges Bank announce the new interest rate?

Norges Bank will announce its official interest rate decision on Thursday at 10:00 AM.

What is the current policy rate level in Norway?

The policy rate stands at 4.25 percent following a previous increase implemented in May.

Why are economists divided on the upcoming decision?

While persistent inflation and higher global energy prices push toward a rate hike, a weaker domestic growth outlook, a struggling construction industry, and a strengthening krone argue in favor of keeping rates on hold.