Economists warn trade war could slow Norway's interest rate cuts
Norway is expected to announce a rate cut on March 27th, and economists had previously predicted between two and four rate cuts in the Nordic country in 2025.
The country's minister of finance, former PM, and former Nato chief, Jens Stoltenberg, recently warned that a trade war was about to break out in full, and economists have told the business newspaper E24 that this would dampen the interest rate outlook.
The reason for this is that US President Donald Trump's tariffs could weaken the struggling Norwegian krone further.
'This clearly points towards fewer interest rate cuts because a weaker krone leads to higher inflation,' Kjetil Olsen, chief economist at Nordea Markets, told E24.
'Tariffs from the US against other countries result in a weaker krone and higher interest rates here at home. If the EU responds and there is a tariff war, global growth could weaken,' he added.
Norway's key policy rate currently sits at 4.5 percent after a series of aggressive raises between 2021 and 2023 to try and bring down inflation.
At this point, it was unlikely that the planned rate cut in March could be affected by tariffs, but it could mean there is only a cut in 2025.
'It's not certain that there will be more cuts than in March,' Olsen said.
Marius Gonsholt Hov, chief economist at Handelsbanken, said that there may be fewer cuts than the three to four signalled by Norges Bank, but that Norway's economy was holding up well generally.
'There is a risk of fewer cuts, yes. The important thing is whether there will be tariffs and increased inflation. We assume that, but the question is whether the real economy in Norway will be affected by this. The Norwegian economy is doing quite well today, with lower unemployment than expected and strong growth in disposable real income. There is also momentum in consumption,' he said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Local Norway
5 days ago
- Local Norway
Norway votes down plan to limit investment in Israeli companies
Lawmakers voted by 88 to 16 against a proposal to order the fund to withdraw from companies "that contribute to Israel's war crimes and the illegal occupation" of the West Bank. Norway's sovereign wealth fund, fuelled by vast revenue from the country's oil and gas exports, is the biggest the world and has nearly $1.65 trillion invested around the globe. The government though is under pressure to use its financial clout to influence Israeli policy in the Gaza Strip and the West Bank, where its settlement policy has been deemed illegal under international law. In a letter signed by about 50 non-governmental organisations, Norway's main union LO called on the Labour government to ensure that the fund's investments were in line with the country's legal obligations. The UN special rapporteur on the occupied Palestinian territories on May 20 urged Oslo to "fully and unconditionally divest from all entities linked to Israel's unlawful presence in the occupied Palestinian territory". Francesca Albanese said Norway's fund held $121.5 billion -- or 6.9 percent of its total value -- in companies "involved in supporting or enabling egregious violations of international law in the occupied Palestinian territories". Advertisement Norwegian Finance Minister Jens Stoltenberg in response called for an end to violence, the liberation of Israeli hostages kidnapped on October 7, 2023 and the resumption of humanitarian aid. But he said the fund's investments "do not violate Norway's obligations under international law". The fund is regulated by a raft of ethical rules and has already divested from 11 companies because of their activities in the occupied West Bank. In May, it withdrew its investment in Paz Retail and Energy, which distributes fuel in Israeli settlements. Relations between Norway and Israel have soured since May 2024, when the country joined Spain and Ireland in recognising the state of Palestine
Local Norway
6 days ago
- Local Norway
'Without BankID you are nobody': Foreigners in Norway lament bureaucratic headaches
Getting a Bank ID When asked to list their worst bureaucratic headaches in Norway the single most widespread gripe among our international readership and online groups was the complex and drawn-out process of obtaining a BankID, Norway's digital identity system. Without it, daily life grinds to a halt. 'You are effectively locked out of Norwegian society,' one reader said. 'No mobile phone number, no online shopping, no Vipps. There are some places where that is the only payment option, which is very frustrating." One respondent, Abby Noble, described it as a 'chicken and egg' conundrum. To get a BankID, you need a bank account. But to open a bank account, you need a registered address — which you often can't get without a bank account. "Why is a bank account necessary for having access to your health page in Norway?" complained Sebastian Rojas, from Chile. READ ALSO: What are the rules for getting a BankID at Norway's banks? The frustrations of having a D-number Many people, such as newly arrived asylum seekers or EU citizens planning to work in Norway for less than six months, or other foreign workers on job seeker permits, are only eligible for a D-number, which can make it hard to open a bank account or access a wide range of other services. Megan Thorsen said that after she was given a D-number on the back of her job-seeker visa, she struggled to set up something as basic as an internet connection. Others found that banks simply had no process for D-number holders, even when they had job offers in hand. 'I went to four banks,' one reader recalled. 'Eventually my Norwegian friend called his banker, who was shocked they couldn't help. They just hadn't seen the issue before.' But even getting a D-number seemed to take some time. 'Without a D-number, you are nobody. And nobody tells you what you're supposed to do next," one respondent moaned. Advertisement READ ALSO: How to switch from a D-number to a fødselsnummer in Norway Trouble opening bank accounts It wasn't only people on D-visas who had trouble opening bank accounts. One Polish respondent said the most frustrating thing about living and working in Norway was simply "waiting". "Over two months to open a bank account!" he exclaimed. "I think the response time to get all the papers ready is sometimes too much," Sebastian Rojas said. "To get my National ID number and the bank account took me at least three months. Without those two things in Norway you are very restricted to what you can actually do." Banks require physical documents, which are sent by post, and Norwegian post won't deliver unless your name is on the letter box. 'It was a nightmare,' said Abby Noble. 'I was only able to solve it thanks to kind Airbnb owners and friends I made at Norskkurs.' READ ALSO: What you need to know about opening a bank account in Norway UDI processing times Advertisement The Norwegian Directorate of Immigration (UDI) also came in for heavy criticism — particularly for long waits for family reunification and citizenship applications. 'Family visas are taking 12 to 15 months,' said Frida Cota, who had to endure a long-distance relationship while waiting. "Citizenship applications are now taking 30 months if they are not automatically processed. And nobody knows or will tell what the criteria is for automatic processing." Carla Colombon, from Mexico, was unable to work for over 18 months while waiting to get all the necessary paperwork done. 'Such a waste of time and skills and super expensive for my partner and me to live on only one income." She said it has also been "incredibly frustrating" not to be able to travel freely when living in Norway on a temporary visa. Advertisement Problems getting appointments/phone contact "Have you tried calling any institutions? Waiting times of 30 min and more," complained one anonymous respondent, who described Norway as "close to a failed state". "And there is no feedback, as in normal countries (you don't get an option to evaluate how the phone call went)". "When you have to register in the country, the next appointment with the police is like half a year away somewhere in Finnmark," the commenter added. Contradictory answers/poor information Several respondents complained of getting contradictory information from different government officials, or on different government websites. "The information is not coherent," complained Elva Popsen from Greece. "When you register at UDI as a job seeker, nobody tells you that you should go to NAV [the unemployment service]. Also at the tax office, nobody tells you that you should try NAV first if you don't have a job yet." "Any interaction with government institutions leads to contradictory answers," agreed an anonymous respondent, pointing to a "discrepancy between what is indicated on the website and what was provided by direct communication". Lack of understanding among ordinary Norwegians "The challenges immigrants face are not relatable to most locals," Amber Renee explained. "They've never had to get a personal number, never had to deal with UDI, and never had to understand or care about any of these processes." "This seems to carry over to the native Norwegians who design the processes or are working in service positions for the bureaucracy. They still do not relate or understand the full picture and do not really care because it doesn't affect them." Would you add any other obvious bureaucratic hurdles? Share your own experience in the comments section below.
Local Norway
7 days ago
- Local Norway
What the weakening of the dollar against the krone means for Norway
In January, 1 dollar traded at 11.5 kroner. This week, it was at 10.1 kroner – and currency analysts expect the dollar's weakening to continue. READ MORE: How the latest trade war developments have affected the Norwegian krone A steady decline Norwegian strategists cite several drivers behind the dollar's decline, many of which are tied to US policy under President Donald Trump. Senior Strategist at Sparebank 1 Markets, Dane Cekov, highlighted several key factors: President Trump's tariffs could dampen US economic growth, the effect of expansive tax cuts on public debt, raising concerns among investors, and proposed changes to taxation on foreign investment. "I think more people will question being so exposed to the US," Cekov told the business newspaper e24 . "The combination of these... factors will result in a weaker dollar in the future." Advertisement Long-term prospects Several other Norwegian financial analysts share this view. The dollar is likely to remain under pressure for several years, driven by growing caution among international investors, according to Lars Mouland at Nordea Markets. "The country has large budget deficits and is dependent on a lot of money from the rest of the world," Mouland told the newspaper. Nils Kristian Knudsen of Handelsbanken added that a weaker dollar aligns with Trump's own long-term preferences, though he warned that sharp, fast movements – rather than gradual shifts – could create instability. READ ALSO: What are the US tariffs on Norway, and how could they affect you? What all this means for Norwegian consumers While still strong by historical standards, the dollar could weaken further – possibly reaching 9 kroner in the coming years. But what does this currency shift mean for everyday Norwegian consumers? For most people living in Norway, a weaker dollar typically brings some positive short-term effects. Advertisement Holidays to the United States, online shopping from American websites, and dollar-denominated goods and services become more affordable. If the dollar continues to weaken, as Cekov and other analysts expect, this could also help lower prices on a range of imported goods, such as electronics – though global supply chains and shipping costs also play a role. Bad news for Norwegian exporters On the flip side, a stronger krone relative to the dollar hurts Norwegian exporters. Companies that sell goods or services priced in US dollars, such as in the oil, seafood, and maritime sectors, receive less in kroner for every unit sold abroad. When the dollar's value drops, their earnings – once converted back into Norwegian currency – decline. Advertisement What comes next? While there is a consensus in Norway at the moment that the dollar may weaken further, experts caution that it won't be a straight path. Currency movements are influenced by interest rates, investor sentiment, global economic trends, and political developments. For Norwegian consumers, the bottom line is this: your kroner now go further in dollar markets, but the strength of the krone could also affect jobs and earnings in Norwegian export-heavy industries. READ MORE: What Norway is doing to prepare for the upcoming tariff war
