The chief economist initially thought there would be four interest rate cuts this year, but now believes there will only be two. Previously, it was believed that the interest rate would fall to 3.5 percent within the year. Now he thinks it will be 4.0 percent.
In other words, Frank Gollum of Den Danske Bank has become more pessimistic.
– We must realize that we have overestimated the contribution of parties in practical life to controlling inflation, Gollum wrote in his latest forecast report. He was FinanceAffairs.com Who mentioned this for the first time?
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Controls wage growth
It is therefore good wage settlements that can slow down interest rate cuts according to the chief economist. He fears that in practical life both parties will not take into account the increasing price increases in the same way they did before.
It is believed that wage growth next year will be stronger than previously thought. He is revising his forecast from 3.5 to 3.8 percent when it comes to wage growth.
However, the chief economist believes there will be two interest rate cuts this year, one in September and one in December.
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The wild card is the job market. If it is very narrow, that is, it is difficult to get enough people, then wage growth could be stronger. However prices will rise again. High wage growth and weak productivity growth cause the Bank of Norway to fear the specter of inflation.
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“We believe this fear will diminish as inflation declines, but here the uncertainty is significant,” Gollum writes.
The Crown Prince is pessimistic
The krone exchange rate fell in March and April by four percent. Throughout May, it was strengthened.
However, we remain concerned that economic development may weaken over the course of the year, and at least see the prospects for a strong cyclical recovery as relatively limited, warns Gollum. It is believed that the krone will remain “relatively weak” throughout the year.
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