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Another Interest Rate Cut Coming? Norges Bank Sees a Weakening Economy
The level of interest rates affects, among other things, loan installment amounts and the Norwegian krone exchange rate. Fot. Adobe Stock, licencja standardowa
Norges Bank has published the "Regionalt nettverk" report, which points to weakening economic activity in Norway. At the same time, some of these trends could accelerate the decision to cut interest rates in 2026. Companies are reporting easier access to employees, but also expect a decline in production in the coming months.
Economists emphasize that production in recent months has developed in line with previous forecasts. At the same time, weaker activity is expected as spring approaches, as confirmed by Jeanette Fjære-Lindkjenn from DNB Carnegie in E24.
She points to lower capacity utilization in many companies. In her opinion, the current data may increase the likelihood of rate cuts as early as March, although the central bank's December decision seems rather certain. The market estimates the chances of a March cut at around 50 percent.
She points to lower capacity utilization in many companies. In her opinion, the current data may increase the likelihood of rate cuts as early as March, although the central bank's December decision seems rather certain. The market estimates the chances of a March cut at around 50 percent.
Less Pressure in the Economy
The chief economist at Sparebank 1 Sør-Norge, Kyrre Knudsen, also points to signs of decreasing pressure in the economy. He believes that current conditions favor a scenario of cuts, which may be more clearly reflected in the new central bank forecasts. He emphasizes that labor market analysis is now a key element in assessing monetary policy.
A declining number of companies struggling with recruitment difficulties and weaker activity in some sectors are stabilizing the economic outlook. The economist assesses that Norges Bank may raise the probability of a rate cut in March.
A declining number of companies struggling with recruitment difficulties and weaker activity in some sectors are stabilizing the economic outlook. The economist assesses that Norges Bank may raise the probability of a rate cut in March.
The economy is also affected by uncertainty in international trade.Photo: Adobe Stock, standard license
Industries React Differently
The report also shows increasing differences between industries. Companies assume that higher household purchasing power will boost demand for services and products, although a weakened construction sector and lower activity in the oil sector may limit the pace of growth. In retail, a strong increase in sales is expected in the fourth quarter, mainly due to announced changes in VAT on electric cars.
The tourism sector expects the highest growth, driven by a rising number of visitors from outside Europe. At the same time, companies admit that access to employees is currently the easiest it has been in several years.
The tourism sector expects the highest growth, driven by a rising number of visitors from outside Europe. At the same time, companies admit that access to employees is currently the easiest it has been in several years.
New Forecasts on the Way
Most economists believe that next week's meeting will not bring any changes. The latest inflation data for November, indicating a 3 percent increase in prices, remains in line with the central bank's previous assumptions.
Planned cuts are still distant and postponed to 2026. However, upcoming forecasts will show how quickly decisions regarding rates may actually come into effect.
Planned cuts are still distant and postponed to 2026. However, upcoming forecasts will show how quickly decisions regarding rates may actually come into effect.
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