September 20, 2021

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The chief economist thinks rate hikes should be delayed: - I often say that sometimes the best job you can do as a central bank governor is to do nothing

The chief economist thinks rate hikes should be delayed: – I often say that sometimes the best job you can do as a central bank governor is to do nothing

Thursday is the norges bank interest rate meeting. Since this is called the mean interest rate meeting, it means that the central bank is not providing a new course for the interest rate or other forecasts for the economy. No press conference was held either.

However, what is expected is that Central Bank Governor Oustin Olsen will use the opportunity to confirm that there will be a rate hike at the September 23 interest rate meeting. Today, the key policy rate is zero percent after several interest rate cuts last year, which reached a record low. It has been there since May 7 last year.

– Can’t rush

Norges Bank’s June monetary policy report is based on the premise that the fourth phase of reopening will be implemented by the end of August. However, Health Minister Bint Hoy said at the government’s press conference on Friday that the fourth phase has been postponed until all adult Norwegians have been given the vaccination.

This week it became clear that Norway will receive an additional 1 million doses of the Moderna vaccine. On the government side, it is therefore likely that people will largely be able to live as usual by the end of September. It involves saying goodbye to 1 meter distance and many other aura procedures locally.

Chief Economist Jan Ludwig Andresen at Ica believes the pandemic will continue to affect the Norwegian economy for a long time to come.

Tourism, nightlife, culture and entertainment will continue to be affected by the epidemic. Changing the interest rate is a big step. This cannot be based on uncertain indicators. We have low inflation, low housing market prices, and unemployment at five per cent. Then it may be impossible to raise this interest rate.

Rather, he believes, an early increase in interest rates could contribute to financial uncertainty.

– If I were to evaluate interest rate expectations, it would be wise to take that in the direction of the December meeting. We don’t know much about whether the housing market will return, and whether unemployment will continue to decline, or will stabilize at around five percent. I often say that the best job you can do as a central bank governor is to do nothing sometimes.

The economy is developing almost as expected

Andreessen also points out that it has not been decided who will sit in the government when the interest rate meeting comes in September.

It is not clear what kind of fiscal policy this government will pursue, and how the markets will respond to this. We don’t need, on top of all the other uncertainty that involves an overactive central bank, he says.

Chief Economist Carrie Dew Andersen at Handelsbanken Capital Markets does not believe the news from the government will change the central bank’s plan to raise interest rates in September. She points out that the news of the epidemic in recent weeks has gone in both positive and negative directions.

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Handelsbanken chief economist Kari Due-Andresen believes that a September rate hike will be as planned.

Handelsbanken chief economist Kari Due-Andresen believes that a September rate hike will be as planned. (Photo: Michaela Berg)

It may seem that this increase in infection will not affect the Norwegian economy as much as the waves of infection did before, with more and more vaccinations. However, the government wants to be safe, and has postponed the reopening.

Due-Andresen believes that the Norwegian economy is developing roughly as expected.

The June report from the Bank of Norway assumed that we would reach stage 4 by the end of August. As it stands now, it is expected to arrive in mid-September. These are small differences in the larger context, and predictions from the past hold up well.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.