So much for recent reports that Norwegians were feeling better about their household finances: Now comes news that prices are rising again by more than expected, reducing the prospect of lower interest rates just as stock markets are falling around the world because of the new US president’s threatened trade wars.
The state commission in charge of setting Norway’s official price growth estimate for this year suddenly raised it on Tuesday, from the 2.5 percent announced just a few weeks ago to 2.7 percent. The estimate announced by the Teknisk beregningsutvalg, TBU, is important because it’s the figure used by both sides in annual labour negotiations between employers’- and workers’ organizations.
TBU had thought price growth was slowing in Norway, and would continue to do so throughout the year. The commission admitted to great uncertainty, though, because of international tension, US President Donald Trump’s repeated threats of trade wars that can also affect Norway, and Norway’s already weak currency. The krone has been strengthening in recent days, but mostly because the US dollar has weakened.
TBU’s increase in its estimate came just a day after Norway’s state statistics bureau SSB (Statistics Norway) reported that prices have also actually risen by a surprisingly high 3.6 percent over the past 12 months from March 2024 to March 2025. Norway’s core inflation rate (including changes in energy rates and state fees) rose to 3.4 percent. That’s also much higher than the 2.3 percent annual average price hike SSB had announced in January along with a core inflation rate at the time of 2.8 percent.
“This is all quite an inflation shock,” Kyrre Knudsen, chief economist at Norway’s Sparebank1, told news bureau NTB. Kjetil Olsen, chief economist at Nordea Bank and Sara Midtgaard, Nordea Markets’ chief strategist, also confirm that the most recent inflation numbers are “much higher than expected,” and may prompt Norway’s central bank (Norges Bank) to postpone or even cancel a long-expected interest rate cut later this month. The central bank’s own inflation goal remains at just 2 percent.
Now the prospect of lower interest rates is unlikely, at least not until later in the year. Kjersti Haugland, chief economist for the markets division of Norway’s largest bank DNB, changed DNB’s own prognosis and now doesn’t think any interest rate relief will come until September and December.
Labour unions, meanwhile, have once again been demanding real wage growth of at least 2.2 percent this year, and government officials including Norway’s new finance minister Jens Stoltenberg have stated that “there’s room for real pay growth” this year. Economists had expected pay growth of around 4.3 percent.
That was when actual price growth was expected to be around 2.6 percent. Now, given Tuesday’s jump to 2.7 percent and the prospect of a policy interest rate staying at 4.5 percent, the outlook is much different. Pay raises offered by employers now must amount to at least 4.9 percent in order to meet labour demands for real wage growth at a time when unemployment is low and the labour market is tight. Employers won’t be happy.
The new “shocks’ can quickly dampen both housing- and holiday home (hytte) markets. They’d become brisk in recent months, and prompted buyers to stretch their borrowing capacity. A study released in late February, the annual so-called Forventnings (Expectations) barometer conducted by FinansNorge and the Verian Group, had indicated Norwegians’ faith in their own personal economy had risen. Optimism was back after a period of several interest rate hikes, high inflation and low pay growth. Midtgaard of Nordea had told newspaper Dagens Næringsliv (DN) in late February that she thought Norwegians would experience better personal economy this year.
Now the sudden inflation hike and uncertainty around interest rates may again dampen demand for new homes and especially holiday homes. Sales of mountain hytter had taken off after sluggishness last fall and earlier this winter, but could also slow now.
Stock market turbulence is also raising alarm, and already cut into Norway’s huge sovereign wealth fund known as the Oil Fund. Its value has fallen from more than NOK 20,000 billion just two weeks ago to NOK 18.803 billion as on Tuesday afternoon. Some major Norwegian investors are warning of a stock market “crack,” with billionaire Kjetil Holta telling DN last week that “Trump seems quite crazy, and that can damage share values anyone may be sitting on.”
Large Norwegian insurance and investment company Storebrand, meanwhile, has confirmed selling shares by the millions, with its leader of asset management Olav Chen telling DN that “Trump is playing with fire.” Chen warns against underestimating how much uncertainty Trump can create. He thinks Trump may try “to talk up the market again,” he said, but higher tariffs can lead to higher prices, higher inflation and higher interest rates all over the world.
NewsinEnglish.no/Nina Berglund
