Several central banks are moving to increase interest rates, and DNB Carnegie doesn’t rule out the possibility that Norway has already reached the bottom of its rate cycle.
Norway’s persistent inflation is prompting central banks to consider further rate hikes. Economists are now debating whether the country has already hit its lowest interest rate point.
During January’s monetary policy meeting, Governor Ida Wolden Bache noted that core inflationcore inflationprice growth (CPI) adjusted for changes in taxes and energy goods has remained near 3 percent since the fall of 2024. This metric is the primary focus for the central bank when setting interest rates.
The current economic climate is forcing policymakers to carefully weigh the risks of both raising and lowering rates, as global economic conditions remain uncertain.
– Risk on the Upside
Fresh inflation data for January is scheduled to be released by Statistics Norway on Tuesday. Economists surveyed by Bloomberg anticipate both overall and core inflation will approach in at 3 percent.
“We believe core inflation will remain unchanged at 3.1 percent, and will therefore still be higher than Norges Bank’s forecast,” says Kjersti Haugland, chief economist at DNB Carnegie.
Norges Bank’s latest estimate was 2.9 percent. If Haugland and DNB’s economists are correct, it could influence the central bank’s rate plans for 2026.
“If it remains high, there is more reason to be cautious with rate cuts going forward, as long as the economy remains strong.”
DNB Carnegie currently expects Norges Bank to make only one rate cut this year, anticipated in June. The central bank itself has suggested one to two cuts.
“Forecasts are uncertain. But we can’t rule out either more cuts, or even a rate hike, if the economy remains strong,” Haugland added.
She pointed to a recent analysis from her firm, where senior economist Kyrre Aamdal discussed the risk of a rate increase.
“Norges Bank’s main scenario is a rate cut, but the risk is on the upside,” Aamdal wrote.
Haugland noted that several central banks are now increasing rates, suggesting that Norway may have already reached the bottom of its rate cycle.
“The uncertainty points in both directions,” she said.
Bright Prospects in the US
Next week will similarly see the release of the important Nonfarm Payrolls report from the US, providing insight into the state of the world’s largest economy.
Due to a partial government shutdown in the US, the report is slightly delayed.
“We believe unemployment will fall further to 4.3 percent in January,” Haugland said, citing optimism from other surveys.
She indicated that fears of a weakening US labor market have diminished.
“If that continues as we expect, the fear will diminish further. This will fuel the belief in the Federal ReserveFederal Reservethe central bank in the USA that there is no need for further rate cuts in the US.”
DNB Carnegie still believes the US central bank will make one rate cut in June.
“And we think that’s it.”
The strong performance of the US economy is attributed to tax cuts from President Donald Trump and a lessening of negative effects from tariffs, according to Haugland.
“Now there is increased purchasing power, and it is a very investment-driven. Also, you don’t have the drag from the shutdown that was at the end of the year,” she said.
Bloomberg economists expect the report to show job growth of 69,000. DNB Carnegie is more optimistic, predicting 100,000 new jobs in the US labor market in January.
Salmon Feast
The week also features quarterly earnings reports from several of the largest companies on the stock exchange.
Nordea’s head of investment, Robert Næss, highlights seafood companies as particularly interesting. SalMar releases its report on Tuesday, and Mowi follows on Wednesday.
