This week comes the answer to how much prices rose in Norway in February. In the United States, Top Numbers of the Month is also published.
The Norwegian price increase surprised most people when it reached seven percent for the month of January. In advance, according to Bloomberg, economists had expected a price increase of 6.5%. Core inflation surprised the most, hitting a record high of 6.5 percent.
On Friday of this week, the numbers for February will arrive. The central bank has an inflation target of two percent.
In line with everyone else’s, we’ve increased our expectations of where Norwegian interest rates should go. If inflation figures continue to rise, interest rates are likely to triple, says Danske Bank chief strategist Anders Johansen.
The key interest rate, set by the Bank of Norway and led by central bank governor Ida Woldenbashi, is currently 2.75 percent.
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Don’t believe in 3.75 percent with peak interest rates
In the latest report from the central bank in December, the interest rate was expected to peak around three percent, with a slight chance of another increase after that.
A number of banks have revised their interest rate forecasts in line with the strong headline numbers. Nordea and Handelsbanken revised their forecasts to 3.75 percent. They did this, among other things, after interest rates caught up in the market, peaking at precisely 3.75 percent.
Danske Bank has 3.25 percent as its highest forecast. That could change quickly if price inflation continues to rise, and activity in the international economy remains high.
– says the chief strategist, we are about to happen.
Johansen says he thinks banks that cap interest rates at 3.75 per cent are taking it too hard.
– We think it’s too high, but it’s certainly not as impossible as it is now. It depends on how quickly the markets calm down. The primary goal of raising interest rates is to calm the economy. There is a very long delay from the time the interest rate is set up until the action begins. It may not have had its full effect until a full year later, he says.
“The most important number of the month”
On Friday, there will also be numbers on the number of jobs created outside of agriculture in the United States.
Non-Farm Payroll is so important because it measures activity in the world’s largest economy – which is why it’s often called the most important number of the month. All over the world, markets are closely following the release of numbers, which can usually have significant immediate effects on the markets.
— “Nonfarm payroll” is the big event, says Johansen.
The US central bank, the Federal Reserve (Fed), is trying hard to cool down the economy in the country in order to overcome the high inflation. The Fed, like the Bank of Norway, has an inflation target of around 2%. A tight job market with few vacancies and many new jobs is a sign of rising economic activity.
– It will be interesting to see that. It was much stronger than expected in February, he says.
Figures for January showed that 517,000 new jobs were created. Economists projected in advance that 188,000 new non-agricultural jobs would be created in the United States. In December, 223,000 jobs were created.
The chief strategist adds that although the numbers were much stronger than expected, the numbers can be explained, at least in part, by the fact that more jobs are often created in January, and that the weather was particularly warm.
The last meeting of the Governor of the Central Bank
There are also a lot of exciting events in Asia this week. China recently announced that it expects an economic growth of around five percent. This is down from last year’s target of 5.5 percent. Reuters He writes that a target of six percent was foreseen in advance.
The growth target is being presented in connection with the annual People’s Congress, which was held this weekend.
– Many believe that growth will be stronger than five percent, says Johansen.
In Japan, Haruhiko Kuroda is stepping down as central bank governor after he has been in the presidency since 2013. Friday will be his last interest rate meeting. He was replaced by economics professor Kazuo Ueda.
The country recorded the highest inflation rate in more than 40 years. This was shown by the January figures presented at the end of February.
Japan is the only country in the world with negative interest rates. It is expected that at one time or another they will make some changes, says the chief strategist.
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