Norway’s Economic Tightrope: Inflation, Interest Rates, and Global Impacts
Norway’s central bank, Norges Bank, is navigating a complex economic landscape. While several central banks are increasing rates, DNB Carnegie suggests Norway may have already reached the bottom of its interest rate cycle. This comes as persistent price growth continues to challenge policymakers.
Core Inflation Remains a Key Concern
Norges Bank recently held its key interest rate at 4%, signaling no immediate rush to cut rates further. This decision is largely influenced by core inflation, which has remained stubbornly close to 3% since autumn 2024. This metric, representing price growth adjusted for changes in taxes and energy prices, is the primary focus for the central bank when setting interest rates.
January Inflation Data Looms Large
Tuesday will see the release of January inflation figures from Statistics Norway (SSB). Economists anticipate both overall and core inflation will land at 3%, according to a Bloomberg survey. Kjersti Haugland, chief economist at DNB Carnegie, believes core inflation will hold steady at 3.1%, exceeding Norges Bank’s previous forecast of 2.9%. This discrepancy could significantly influence the central bank’s rate plans for 2026.
“If it remains high, there’s more reason to be cautious with rate cuts, as long as the economy remains strong,” Haugland stated.
Upside Risks and Potential for Rate Hikes
DNB Carnegie currently predicts a single rate cut this year, expected in June. While, the possibility of further cuts, or even a rate increase, cannot be ruled out. Several other central banks are now moving towards raising rates, adding to the uncertainty. Senior economist Kyrre Aamdal at DNB Carnegie has highlighted the risk of a rate hike in a recent analysis.
“Norges Bank’s main scenario is a rate cut, but the risk is on the upside,” Aamdal wrote.
US Economic Outlook and Global Implications
The upcoming week also features the release of the US Nonfarm Payrolls report, providing insights into the health of the world’s largest economy. Economists at DNB Carnegie anticipate a decline in unemployment to 4.3% in January, driven by optimistic signals from other economic indicators. The firm believes fears of a weakening US labor market are diminishing.
“If it continues as we expect, fears will diminish further. This will fuel the view within the Federal Reserve that there is no need for further rate cuts in the US,” Haugland explained. DNB still anticipates one US rate cut in June.
Positive economic developments in the US, attributed to tax cuts and a lessening impact from tariffs, are contributing to increased purchasing power, and investment.
Sector Spotlight: Salmon and Aviation
The week’s corporate earnings calendar features key reports from the salmon industry and the aviation sector. Investment director Robert Næss at Nordea highlights the importance of monitoring salmon companies like SalMar and Mowi. While initial expectations for strong earnings in 2026 are high, companies need to demonstrate sustained price improvements.
“Analysts believe they will earn significantly more in 2026 than in 2025. Companies need to reassure investors that this will actually happen,” Næss said.
Næss also points to Norwegian Air Shuttle as a company where even slight changes can have a significant impact on its stock price. The airline’s ability to maintain higher prices through capacity reductions will be a key focus for investors.
What to Watch in Week 7 (February 9 – 13)
- Monday: Quarterly reports from Bakkafrost and Deep Value Driller; Norwegian GDP from SSB.
- Tuesday: SMIC quarterly report (China); SalMar, Vår Energi, and SATS quarterly reports; Norwegian inflation and trade data.
- Wednesday: Chinese economic data (KPI, PPI); Aker BP, Mowi, Storebrand, Yara quarterly reports; US Nonfarm Payrolls report.
- Thursday: AutoStore, Orkla, Veidekke, REC Silicon, Hexagon Composites quarterly reports; IEA monthly report.
- Friday: Norsk Hydro, Aker, Norwegian Air Shuttle, Sea1 Offshore, Tomra Systems quarterly reports.
FAQ
Q: What is core inflation?
A: Core inflation is the price growth (CPI) adjusted for changes in taxes and energy prices.
Q: What is the Federal Reserve?
A: The Federal Reserve is the central bank of the United States.
Q: What factors could lead to a rate hike in Norway?
A: Persistent high core inflation and a strong economy could prompt Norges Bank to consider raising rates.
Q: What is the significance of the US Nonfarm Payrolls report?
A: It provides a snapshot of job growth and unemployment in the US, offering insights into the health of the world’s largest economy.
Did you know? Norway’s central bank prioritizes core inflation when making decisions about interest rates.
Pro Tip: Keep a close eye on the January inflation data from SSB, as it will likely influence Norges Bank’s future rate decisions.
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