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New shocks for the portfolio: Inflation in Norway and its impact on everyday life
Inflation in Norway has become a source of concern for both economists and households. With inflation rising, the Norwegian Central Bank appears to be facing difficult decisions this coming Christmas.
The krone exchange rate and price shock leave the Norwegian Central Bank with a challenge ahead of Christmas
W have been reported in Norway in recent months significant increase in inflation. This became especially visible in October, when electricity and food prices have increased significantly, and the annual inflation rate increased from 3,3% to 4,0% in just one month. The so-called core inflation that takes into account the volatile price changes, rose to as much as 6%, which is far above the Norwegian Central Bank's long-term inflation target of 2%.
The increase in the so-called core inflation: What can the Norwegian Central Bank do?
Even though the Norwegian Central Bank raised rates percentage from 2,5% to 4,25% over the last two years, thus trying to reduce inflation, this is the so-called core inflation continues to grow. This highlights how difficult it is to control spiraling inflation once it gathers pace.
Expectations and imports: What is driving high inflation?
Part of the problem comes from expectations and imported factors. Economic experts often incorrectly predict inflation, and many of the current price pressures are a result imported goods and services that are beyond Norway's control.
The weakening of the krone and its impact on imported goods
Norwegian crown weakened significantly against both the dollar and the euro over the year, losing almost 14%. This will result in maintenance price increases imported goods in the long term and will increase prices in stores.
Interest rate hike in December: What to expect?
Taking into account recent data on the increase in inflation, it is unlikely that Norwegian Central bank will cancel the planned interest rate increase in December. This will be the 14th interest rate increase in two years and is likely to become a reality in the period before that Christmas.
A look into the future: What will happen to inflation and interest rates?
Even though there are signs that inflation is declining and approaching a peak Stop interest rates, it may take some time before households feel financial relief. We hope that increase of unemployment will remain moderate and wage growth will eventually outpace price growth.
Influence inflation on household finances
Even if inflation becomes more controlled, consumers must prepare for the fact that the prices of goods and services will not fall but will continue to rise, albeit at a slower pace. This will impact your home finances and force you to plan your budget carefully to meet the rising costs that come with the price increases.
Prices will not fall: Inflation remains constant
To sum up, it is clearly visible that inflation in Norway constitutes an additional challenge for households during the holiday season. Prices of goods and services remain high, and the economy isn't likely to normalize anytime soon. Therefore, it is important to be careful with your finances and plan carefully budget.
