(Bloomberg) — Norway’s central bank is poised to raise its key interest rate for the eighth time on Thursday in what could be the last increase in borrowing costs for the Nordic country teetering on the brink of a recession.
All economists surveyed by Bloomberg expect Norges Bank to raise its key rate by 25 basis points to 2.75%, the highest level since the financial crisis. Investors will likely zero in on the outlook to see if policy makers are backtracking from their planned increase “to around 3% in the course of winter,” projected in September.
Inflation not seen since 1980s and economic growth backed by increased demand for Norway’s oil and gas have exceeded the central bank’s forecasts over the past few months and led to faster tightening over the second half of this year. Now, policy makers may choose to cut short their planned tightening after a swathe of recent data suggests price growth has peaked and the outlook for the economy is worsening.
“I’m pretty certain that Norges Bank will deliver the expected 25 basis-point hike,” said Tina Winther Frandsen, chief economist with Jyske Bank A/S. “Therefore the rate path will be in focus. I expect it will be lowered — but only a bit — as to show a final rate hike to 3% in the first quarter.”
Norway’s expected move will come as part of a salvo of rate announcements this week, with the Federal Reserve, the European Central Bank and the Bank of England all set to raise their key rates by 50 basis points.
Norges Bank was among the first in the rich world to start raising rates in September 2021, but its gradual moves weren’t enough to contain surging prices and it had to abandon a plan of steady 25 basis-point rate increases in June, opting instead to deliver the steepest hikes in two decades.
Inflation slowed last month from a 35-year high, while housing prices in the country that has some of the most indebted households fell for a third straight month. The central bank’s key survey of business sentiment last week showed economic prospects are the weakest since 2009, with activity seen hit by “rapidly rising prices and costs, higher interest rates and a decline in new public sector orders.”
Several forecasters, including the central bank, expect a contraction next year in the mainland economy that excludes offshore businesses. In contrast, the employers lobby NHO on Tuesday forecast a 0.9% expansion for 2023, and the statistics office said last week it expects growth of 1.2%. In October, the mainland economy ground to a halt due to the seasonally volatile fishing business and weaker domestic trade.
A quarter point hike is on the cards now, according to Marius Gonsholt Hov, chief economist in Oslo for Svenska Handelsbanken AB. If policy makers publish a rate path that indicates 3% in the first quarter, they’re looking to signal that decision is dependent on data, he added. That puts the peak in the interval of 2.75% to 3%, versus previously 3% to 3.25%, he said.
“Norges Bank is likely to buy itself some time, and use the next few months to evaluate the further consequences of the tightening that has already been implemented while also retaining the option of tightening even further, if necessary,” he said. “Norges Bank is probably not ready to shout mission fully completed.”
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
