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Will the Situation in the US Affect the NOK Exchange Rate and Loans? Americans Could Change Norges Bank's Plans
Norway could lose billions from the Oil Fund. It has tools to influence the weakening of its own currency. Then the losses will be smaller. Fot. stock.adobe.com/licencja standardowa
Jan Ludvig Andreassen, chief economist at the Eika group, predicts that Norges Bank may be forced to cut interest rates as many as four or five times in the coming year. In his opinion, the pressure for such moves may be linked to a more aggressive monetary policy in the US and a weakening dollar.
Andreassen claims that the US Federal Reserve (Fed) may move towards accepting negative real interest rates, aiming to weaken the dollar and reduce the US trade deficit. In his view, such a strategy could put pressure on Norges Bank to respond with further rate cuts.
Ultimately, Andreassen suggests that interest rates in Norway could fall to between 2.5 and 3.0 percent. He also points out that some of the state budget revenues based on oil extraction and sales may suffer in conditions of a weaker dollar.
Ultimately, Andreassen suggests that interest rates in Norway could fall to between 2.5 and 3.0 percent. He also points out that some of the state budget revenues based on oil extraction and sales may suffer in conditions of a weaker dollar.
Interest Rates in Norway. What's Next?
Kjetil Olsen (Nordea Markets), writing for E24, takes a more moderate stance. He agrees that a weaker dollar may increase risks for the Norwegian economy, but believes it is not certain that exchange rates will become the main factor determining Norges Bank's policy.
Olsen predicts rather two interest rate cuts by the end of 2025, rather than four or five. He emphasizes that Miran – Trump's advisor with influence on the Fed – is just one voice in a broader committee, which may make it difficult to implement radical changes.
Olsen predicts rather two interest rate cuts by the end of 2025, rather than four or five. He emphasizes that Miran – Trump's advisor with influence on the Fed – is just one voice in a broader committee, which may make it difficult to implement radical changes.
The Norwegian extraction industry largely relies on dollar transactions.Photo: Equinor press materials, Øyvind Gravås & Even Kleppa
Both economists, however, rule out that a decline in the dollar's value alone would trigger a new financial crisis. They point out, however, that such a move in the currency market could bring significant uncertainty and affect global capital markets. In Norway's case, a particular threat is the impact on the value of the Oil Fund (Norwegian Oil Fund), which is largely based on the dollar.
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