Norway’s central bank raises interest rates to highest level since 2011

The key interest rate will be raised to its highest level for over a decade after Norway's central bank, Norges Bank, announced an increase on Thursday. 

Pictured is the barcode district in Oslo.
Norway's central bank has raised the key interest rate by 0.5 percentage points. Pictured is the barcode district in Oslo. Photo by Jacek Dylag on Unsplash

Norges Bank has raised the key interest rate by 0.5 percentage points to 2.25 percent, the third double rate hike in a row. 

Norway’s key policy rate is in line with analysts’ predictions and brings interest rates in the country to the highest level in over a decade. 

The central bank has seen sharply increasing rates from historic lows introduced in the pandemic as a tonic to curb inflation. 

“Price growth is clearly above our target of 2 percent, and there is a prospect that it will remain high for longer than previously estimated. We raise the interest rate to curb price inflation,” Ida Wolden Bache, governor of Norges Bank, stated when the announcement was made. 

In addition to the current rate increase, the bank said another rise would come in November. 

Inflation in Norway was around 6.5 percent between August and the same month the year before, according to figures from the national data agency Statistics Norway

On Tuesday, neighbouring Sweden raised the policy rate by one percentage point. 

While the interest rate increases are seen as a measure that can help curb inflation, several groups have warned that the hikes could lead to increased unemployment. 

Statistics Norway said Thursday that unemployment would likely increase in the near future as a result of rate increases. 

“Increased interest rates and inflation, together with the decline in the international economy, will slow down the Norwegian economy and contribute to increased unemployment,” director of Statistics Norway Geir Axelsen told Norwegian newswire NTB. 

“We think there will be a slight increase at the end of the year already, while we estimate unemployment will be 3.6 per cent on average in 2023,” he added. 

READ ALSO: How much poverty is there in Norway?

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Unemployment in Norway to rise, says new economic forecast

Unemployment in Norway is set to increase in the months ahead, according to a new economic forecast from the Confederation of Norwegian Enterprise (NHO).

Unemployment in Norway to rise, says new economic forecast

The Confederation of Norwegian Enterprise (NHO) presented its economic forecast on Tuesday morning. Øystein Dørum, NHO’s chief economist, believes that unemployment in the country is set to increase.

Dørum’s latest forecasts are quite gloomy – he believes that unemployment will rise and describes the current situation in the Norwegian economy as characterised by a shortage of goods, raw materials, and energy. 

At the end of September, registered unemployment in Norway stood at 1.6 percent of the workforce.

After the COVID-19 pandemic in Norway effectively ended, employment growth has been at its highest since the mid-1990s. However, several indicators now point to a cooling off of the labor market in the coming years.

According to Dørum, the Labor Force Survey (LFS) unemployment rate (which accounts for unemployed people looking for work without necessarily being registered at the NAV) will amount to 3.1 percent in 2022 and increase to 3.4 and 3.7 percent in 2023 and 2024, respectively.

Decreased demand for labour

Furthermore, NHO’s chief economist warns that the proportion of NHO companies that reported a lack of access to qualified labour decreased in the third quarter of 2022, in line with their employment prospects.

More than one in three companies believe that the market outlook for the next six months has worsened or will worsen.

According to Statistic Norway (SSB) figures, the number of newly advertised job positions is also lower compared to Spring figures, and the decline in unemployment has somewhat leveled off.

The survey among businesses for the third quarter has also shown that more companies now want to reduce the number of workers than increase it.

Every tenth company says they plan to announce layoffs in the next three months. In addition, 8 percent said they plan to dismiss workers, Norwegian Broadcasting (NRK) reports.

“The turnaround has been particularly abrupt in tourism and business-related service provision,” the NHO’s report states.

In conclusion, the NHO assumes that growth in the workforce will level off when activity in the Norwegian economy declines.