Central Bank President Ida Welden-Basch warned that “monetary policy is working.”
Well – the krone exchange rate hit its lowest levels since May of this year on Thursday afternoon. You have to come out with 11.89 NOK For one small euro.
Today’s weakest rate was 11.90 NOK per Euro. With the exception of two days in May this year, this was the Norwegian krone’s weakest value ever against the common European currency since the coronavirus lockdown began in 2020.
A weak crown causes headaches
– How much headache does a weak Norwegian krone cause you?
-We do not have a krone exchange rate target that we manage it by. Our mission is to ensure low and stable inflation. The krone exchange rate fluctuates, and will fluctuate, but we are concerned about the development of the krone exchange rate because it affects price growth. A weaker krone means that goods we buy from abroad become more expensive in Norwegian krone, and so could cause price growth to stay higher for longer here, as she tells Nettavisen in this video interview:
– If we had not raised the interest rate, price growth would have been higher because the pressure on the Norwegian economy would be higher, but also because we might have had a weaker krone exchange rate, she explained.
– Throughout the year, more and more people were forced to sell their homes through forced sales. How does it affect you?
– Obviously, the interest rate affects different households differently. When the interest rate rises, those with loans face a more difficult financial situation, which comes on top of the fact that many things have become more expensive. The vast majority of Norwegian households have the financial resources to cope with rising expenses, although many will likely have to reduce consumption, Walden-Bache tells Nettavisen.
– It is more expensive not to do so
She admits it will be “demanding” for some.
– So it’s important to remember that the reason we raise interest rates is because we want to reduce price inflation. If we had not raised interest rates, prices would have continued to rise rapidly, and this would have particularly affected low-income earners who have little to support.
– So to those who feel bad today: Would the situation have been worse if you had not raised interest rates?
We know that there is a cost to raising interest rates and that it will be burdensome for some. But the cost of not doing so could be greater.
– Many considerations affect
We need to look beyond the 2 percent inflation target.
Despite the numerous interest rate increases we have seen so far this year, inflation remains high. Why?
– Price growth is affected by several factors, including factors other than setting the interest rate. After all, we have seen behind us sharp increases in many raw material and energy prices, which have increased costs for businesses, which in turn are passed on to consumer prices. And then we see that wage growth has gone up. All these circumstances mean that price inflation remains high.
As for how high prices will be in October, we will get an answer on Friday, November 10.
– Prices are falling
The central bank governor says they will use the October and November figures as a basis before finally deciding whether to raise interest rates in mid-December.
– Is there a light in the tunnel?
– We do not paint a picture of a severe setback in the Norwegian economy, and we see that price inflation has decreased. I concluded that this is a positive thing.
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