For the coming week, the focus among macroeconomists will be on the Norges Bank interest rate decision on Thursday. Most people would agree that there will be a double hike in interest rates.
On Thursday, the Norges Bank will announce its interest rate decision. At the previous interest rate meeting in June, they announced a 25 basis point rate hike, or 0.25 percentage point, at the next meeting.
At the August interest rate meetings, absolutely nothing happens to the interest rate unless there is an unusual situation. The central bank thinks that is the case now, so they have announced that the interest rate will go up, and presumably it will be higher than what was announced in June, says Carrie Deo Andersen, chief economist at Akershus Eindom.
The consensus among macroeconomists now is that the Norges Bank will raise its key interest rate by 50 basis points, even though the central bank itself announced 25 basis points during its June rate meeting.
The inflation target is the number one target, and when threatened, the Norges Bank will probably focus all of its attention on lowering inflation. Deo Andersen says the interest rate should rise faster.
Kjetil Olsen, chief economist at Nordea, believes the central bank is raising interest rates by 50 basis points due to higher inflation figures released for July.
– We think he’ll be 50, but we wouldn’t be surprised if he’s 25 too, he told E24.
It’s an intermediate meeting and they’re not usually used to making big changes unless dramatic things happen. That is the question, did they think the inflation figure was dramatic or not, he asks rhetorically.
Olsen notes that the interest rate is still historically low.
They have some catching up to do, even though they made a big mistake in June. The interest rate is still lower than it was before the pandemic, although inflation and unemployment are at lower levels than they have been in decades.
GDP comes in the shadows
On Wednesday, there will be figures for Norway’s GDP in June. Deo Andersen thinks the numbers will be out with the Norges Bank rate decision.
– GDP isn’t the most important thing today, it’s price pressure, she says.
Olsen says he has no expectations for the upcoming GDP numbers.
– I’m not pro-GDP at all, and I think it’s very volatile. He says it is so uncertain that it is difficult to draw conclusions from it.
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Results season continues
Next week, several companies will present their results for the second quarter. Among the companies that will come under heavy criticism is the Aker industry group, which will present its quarterly numbers on Wednesday.
It is now almost a holding company, and many of the listed Aker companies have already come up with numbers. An interesting thing to follow is the situation in unlisted companies, says Robert Ness, chief investment officer at Nordea.
On Thursday, construction company Veidekke presents its quarterly report.
– Ness says there is a lot about how the Norwegian economy is doing.
Rec Silicon is providing the numbers on Wednesday, and the stock has fluctuated a lot lately. On Friday, the share rose nearly 11 percent.
– It’s a company I don’t see much of, and I haven’t invested in the company. It’s sad when you look at its profitability. They’ve lost money every year since 2015, and losses are expected this year and next.
Other companies providing second-quarter results include MPC Container Ships, Autostore, Wallenius Wilhelmsen, Axactor, 2020 Bulkers and Selvaag Bolig.
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Fed report becomes important
Internationally, there will be figures for industrial production, retail trade and investment in China for the month of July. Olsen believes China is so affected by the epidemic that the numbers aren’t particularly exciting.
– In a way, we know that things are not going well in China because they are closing a lot and backtracking a lot because of Corona. I don’t think the market focus will be there next week.
Olsen believes that the minutes of the US central bank meeting will be the most important internationally this week. He says that many people interpreted Fed Chairman Jerome Powell’s comments after the previous interest rate meeting to mean there would be fewer rate hikes in the future. He believes that this view has received a lot of support, but the forthcoming report does not necessarily show the same thing.
The minutes might say it’s going to be tougher than people’s impression of Powell at the press conference. That could cause a reaction in the market, Olsen says.
The USA also provides figures on trade in goods, due to the pandemic Olsen finds it difficult to interpret these figures.
During the pandemic, we over-consumed goods and under-consumed services. It will stabilize so weak trade numbers are not necessarily a sign that the economy is doing poorly.
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