Online to the point These are comments written by Nettavisen’s editor-in-chief.
If you have five million kroner in debt, the year of Ida Wolden Bache is good news.
If the estimates she presented are correct, you will get around NOK 60,000 more after tax to spend with a year in two years’ time. For many, there is comfort in the fact that interest rates have reached their peak and that they will gradually go down.
The governor’s annual speech is an annual event for anyone interested in the Norwegian economy.
To varying degrees, the content must be interpreted and analyzed because the speakers would like to appear diplomatic and not partisan. So one often has to look for what is between the lines to understand the message.
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Will avoid unemployment
Ida Wolden Bache is clear that interest rates must be high to bring down inflation, but she is also clear that both low price increases and low unemployment are the goals.
This is not normally a contradiction: – In the short term, with the individual interest rate decisions, there may, however, be a conflict between the two considerations. The consideration of low inflation and the consideration of high employment must therefore be weighed against each other, she said in the annual report.
– Our interpretation of the mandate is that we must place great emphasis on employment – also in the current situation with price growth well above the target, said Ida Wolden Bache.
Softer signals about interest rate cuts
Many will interpret this as a signal that Ida Wolden Bache does not belong to the hawks who will keep interest rates high regardless until the price increase is down to two percent.
In the graph she presented, interest rates have fallen from now until well into 2026.
She also sends another good signal to ordinary people – namely increased purchasing power:
– If things go as we now believe, there will be no need for further interest rate increases. With lower price growth and the prospect of wages eventually rising faster than prices, many will find that their purchasing power improves and that debt becomes easier to bear. At the same time, we must be prepared for unemployment to increase somewhat.
Brighter times in sight
All in all, the Norges Bank chief paints a rather optimistic picture. If things go as she thinks, we will have a soft landing and control over both interest rates and price increases without unemployment becoming so high.
On the other hand, she suggests that the time of stable low price increases is over. The year points to climate change, and Ida Wolden Bache wants us to prepare for bigger and more frequent shifts in the economy than in the decades before the pandemic:
- The world must go through restructuring in order to reach the goal of zero net emissions.
- Geopolitical tensions and the desire to secure oneself affect trade and interaction.
- And the labor market will notice technological innovations and artificial intelligence.
Conclusion: Ida Wolden Bache is no interest rate hawk, and she still believes that interest rates will go down before long. Plus with a good wage settlement, and large groups will have increased purchasing power.