Financial market analysts are stunned after the Norwegian central bank Norges Bank raised interest rates (norw. policy rate) to the level of 0,75%. The institution explains its decision with the increasingly better situation in the Norwegian economy, as well as with the improving situation on the labor market. The reason is also the increasing debt of the Norwegians.
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The biggest increase in 7 years
Norges Bank has decided to increase interest rates for the first time since 2011. So far policy rate oscillated at a record low level of 0,5%. This event caused an avalanche of surprise among market analysts. Kjetil Olsen - chief analyst at Nordea - admitted in an interview with E24.no that he did not expect such action from the Central Bank. We are faced with a task changes to our forecasts," says Olsen, "Nevertheless, a decision Norges Bank does not change our perception of the economic situation in Norway," he adds.
President of Norges Bank surprised by the reaction of analysts
Øystein Olsen in an interview with E24.no admits that he is surprised by the reactions of analysts. The interest rate increase followed a record-long period of an equally record-low level. In his opinion, all macroeconomic factors indicated that the Central Bank had to make such a decision. Especially in the context of the country's increasingly better economic situation, as well as high oil prices in the world. Increasing employment in the country is not without significance.
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Not only good times
The President of Norges Bank also emphasized that not only economic indicators and positive information from the labor market were the reasons for the decision to raise. The debt of the Norwegians is also a key factor. Anyway, not only the inhabitants of this country are burdened with heavy obligations. According to IMF data, global consumer debt amounts to $ 164 billion, which is equivalent to 225% of the world's GDP. Øystein Olsen also adds that Norges Bank's decision goes hand in hand with those of other central banks around the world. The purpose of these actions is to reduce the level of debt.
Further increases should be expected
Øystein Olsen also admitted that further interest rate hikes should be expected in the coming years. In the short term, they are to amount to 2% and this level is to be achieved in 2021. He also announced that two more should be expected in 2019.
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The borrowers will feel the increases
An interest rate hike is bad news for borrowers. Especially those who made their commitments seven years ago. They are the ones who will be most affected by the decision made by Norges Bank. It is worth recalling that the level of interest rates directly affects the final cost of the loan taken.
