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.
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