The chief economist confirms that price growth is on the way down, but high prices are here to stay.
We are now in the months with the highest price growth last year, so growth is still high.
This is what Chief Economist Ketil Olsen at Nordea Markets told E24 on Monday. On Tuesday morning, Statistics Norway will present new inflation figures for September.
Economists expect in advance that price growth will reach 4% in September, according to estimates obtained by Bloomberg.
Core inflation, which ignores energy prices and tax changes, is expected to fall to 6.1 percent compared to the previous year. Norges Bank pays great attention to this when it sets the interest rate. The central bank’s goal is to stabilize inflation at around two percent.
-We believe there will be a slight recovery for the rest of the year with a peak of 4.9 percent in December. In comparison, Norges Bank’s interest rate was 5.7 per cent in December. But there is a lot of uncertainty surrounding the calculations, says Olsen, who points to energy prices as one of the uncertainties.
In August, prices rose 4.8 percent compared to the previous year, a decline from the 5.4 percent price increase in July.
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– It won’t be cheaper
Ahead of the numbers, Olsen also believes that the Bank of Norway will raise interest rates again in December, similar to what the central bank said at its previous interest rate meeting.
– The reason why Norges Bank raised its interest rate forecasts is precisely… Consumer price indexConsumer price indexThe Consumer Price Index is used as a general measure of inflation in the economy. – Expectations. There is a high probability of another increase, but it is not a certainty. The krone exchange rate is on the other side of this.
According to Olsen, there are now clear signs that interest rates are really starting to affect families.
-You’ve got yourself real caramel. He says that this is a heavy burden for the lowest paid, and confirms that prices will remain high in the future.
– Price growth will eventually decline, but price levels will remain. He stresses that it will not be cheaper to go to a restaurant next year.
– Slow process
Geisel James Natvik, a professor at BI, believes that inflation is on the way down, slowly but surely.
– Historical studies indicate that the decline in inflation is a very slow process. It has to do with the fact that there are a number of indirect effects, such as trying to compensate through wage growth. There is a tendency for inflation to gain a foothold. All empirical studies show this, Natvik tells E24.
– Extreme caution at first
The professor believes that Norges Bank “slept” a little at the beginning of the price rise.
– Norges Bank’s recent interest rate trajectory envisions that interest rates will remain high for some time. It seems more realistic. In hindsight, they were very cautious at first. Interest rates were very low and people had an incredible amount of liquidity. Now interest rates are starting to rise dramatically. Not from a historical perspective, but the debt ratio is historically high. Now they have to be a little careful again.
Natvik believes that the necessary measures should have been taken already in mid-2020, when it was realized that there would be no global financial crisis as a result of the pandemic.
-If they had taken on more in the beginning, you might not have been able to stay at that level for as long as you might imagine now.
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