Inflation has moderated, according to the June figures that Statistics Norway presented on Wednesday. The price increase was 2.6 per cent in the last year. Not since 2021 has price growth in one year been this low.
Kyrre M. Knudsen, chief economist at Sparebank 1 SR-Bank, believes this might have an impact on interest rates.
– This was great! Inflation fell a lot and more than expected. It is so low that there may soon be an interest rate cut this year anyway, he says.
Hoping for earlier interest rate cuts
In June, central bank governor Ida Wolden Bache said that she did not foresee that the policy rate will be cut during 2024. Knudsen hopes that the figures that came out today can change the outlook.
– The inflation trend in recent months now looks like a straight line downwards, and that is good. This development suggests that the interest rate cut may take place earlier, Knudsen tells NTB.
But chief economist Kjersti Haugland at DNB does not think we can expect accelerated interest rate cuts. When you delve deeper into the figures, you see that it is especially cheaper package holidays and flights that drag down price growth, and that there have been some sales of furniture. It doesn’t help that inflation is 0.2 per cent below what Norges Bank envisioned at its interest rate meeting in June.
– Price growth is slightly lower than what Norges Bank assumed when they pointed to March as the most likely time for an interest rate cut. Today’s figures alone are not enough to shake that impression, says Haugland.
– Cheaper package holidays, flights and furniture are not enough
The prices of food and non-alcoholic drinks have increased by 4.9 per cent in the past year, she points out. The broad price increase is not slowing down as clearly as the June figures themselves show, the chief economist believes.
– Food prices are still high, we have high labor costs at the moment and the krone exchange rate is not helping us either. We have not had any strong strengthening of the krone that might bring inflation down during the next year, she says.
Waiting for a US interest rate cut
The June figures are basically very good news, and core inflation is falling faster than expected, says chief economist Marius Gonsholt Hov at Handelsbanken to E24.
But like Haugland, he believes it is too early to wait for interest rate cuts to be accelerated.
Hov believes that we must also see interest rate cuts among the major central banks internationally, especially in the USA, before it is relevant for Norges Bank to change its interest rate plans. As of today, Norges Bank has outlined that the interest rate will not be lowered until next year.
– I think that is still the case, but should we get more positive inflation news, it might move closer, he says.
– But it is far too early to say with this one piece of news, continues the chief economist.
#Chief #economists #interest #rate #cuts #long #overdue
2024-07-10 11:52:35
