June 8, 2023

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NOK – Norwegian krone, interest

post discussion Expresses the opinion of the writer.

(discussing Northern Norway)The krone is among the currencies that have weakened the most in the world since the new year. The European Central Bank, the European Central Bank, has been marked by several rapid and large interest rate hikes.

And they are likely to continue to raise interest rates at the next meetings, possibly by raising interest rates twice.

Unlike in previous times, the European Union now has a key interest rate equal to or higher than the Norwegian, hence investors prefer to put their money in the Eurozone rather than in Norway.

When fewer people want to buy NOK, it also gets cheaper. Lower demand = lower price.

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The international impression is that Norges Bank has problems keeping up with the countries around us when it comes to setting interest rates. This is due to our high household debt, most of which has floating rates of interest on the mortgage. Steady attention was a clever idea in his day.

In order for the money situation in Norway to become attractive again, the interest rate must rise to at least five percent.

The Norwegian krone is a small currency, which is considered uncertain and risky to invest in. When there is a lot of fear and uncertainty, investors don’t want to buy the Norwegian krone – and then it becomes less valuable.

They then prefer to buy major currencies that are seen as safer, such as the euro and the dollar. Billionaires flee the country and take their money with them, which they invest abroad.

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The Danish and Swedish krona are linked to the euro. This means that the central banks there constantly ensure that the exchange rate of the Euro and the Danish/Swedish krona is always the same, which is called a fixed exchange rate policy. Therefore, the Norwegian krone is also weakening in relation to the Danish and Swedish krona.

Norway imports goods, and it becomes more expensive for us consumers. Since there is a delay in the effect of the krone exchange rate on prices, it will only be properly felt in the long run.

The buying spree is now winding down, and rising interest rates are the main reason.

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Lower oil and gas prices also weaken the Norwegian krone and industries make up a smaller share of the Norwegian economy. It is not a good idea to put too many eggs in one basket.

Abroad, it is not fun to trade with shitcoins i.e. Norwegian krone. Norwegian fiscal policy is a complete mess, and most people are affected.

In light of hindsight, one wonders how this crash could have been avoided. The krone devaluation is not finished, it is here to stay and is putting pressure on the Bank of Norway for more rate hikes.

Mortgage interest rates should be expected by borrowers well into the five figures. It costs at least 12 NOK. So what is the solution? Would it be better if we joined the European Union?

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