At the same time as omikron threatens Norway to close, Norges Bank is preparing for a rate hike early Thursday.
net on case
Electricity prices have risen to a record high, and the new Corona measures are making jobs unsafe for several thousand Norwegian employees.
Already in the past week, more than 5,000 employees have received notices of layoffs, and concerns are growing in many workplaces.
Meanwhile, Norges Bank is preparing for a new rate jump next Thursday.
The warning came at the meeting on November 3, when the rate was not raised: – As we are now assessing the outlook and risk profile, the key policy rate is likely to be raised in December, Norges CEO Austin Olsen said.
Since then, most analysts were skeptical about the rate hike at Thursday’s meeting.
But that was before the Omikron spread and the price of electricity went sky high and created great uncertainty.
Norges Bank wants to be predictable, but that principle could be put into trouble now.
The central bank should definitely postpone a jump in interest rates until the new year.
DnB Markets continues to believe in rate hikes, but chief economist Kerry Andal has had a small reservation that “rising uncertainty could prompt Norges to hold off on raising rates and wait for more information,” he wrote in the latest market report.
If we are to believe the DnB, it is only a matter of preparing for a new rate hike, although there is a certain possibility that Norges will allow it to wait until after the new year.
“Although uncertainty is very high, we believe Norges will raise rates to 0.50% later this week, then again in March, June, September and December, and now 1.5% in December 2022,” macro analysts wrote. Oddmund Berg and Kyrre Aamdal in the latest market report from the afternoon of December 13th.
according to DNB’s list price is now the effective interest rate of 2.4 percent For a loan of 3.0 million NOK.
After tax, this loan costs NOK 56,000 in interest annually, and NOK 12,500 in installments over 20 years.
- Thus, the normal mortgage is 2.15 percentage points higher than the norm bank’s key rate.
- If we use this as a basis and multiply the DNB in our analysis, the interest rate will be 3.65 percent in one year.
- This means that interest costs increase by 50 percent, or approximately NOK 30,000 for our “our” loan.
At the same time that the government is preparing extraordinary support packages for customers and electricity companies who are facing uncertain times, there is therefore a relatively high possibility that the Norges Bank will raise interest rates.
The problem with the central bank is that the data on which the analysis is based appears in the rearview mirror, while the immediate future does not look much brighter for many families who risk an electricity price crisis and unemployment.
Hopefully the analysts are right that 2022 could be a year of solid growth for the Norwegian economy, in which case, an increase in interest rates is a sign of health. But uncertainty is now record high. Therefore, Central Bank Governor Oustin Olsen should have ice in his stomach and postpone a possible rate hike until the New Year.
note! what do you mean? Is it wise to raise rates now, or should Norges postpone the decision until they have more information in the new year? Write a post in the discussion!
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