Thursday, December 11, 2014

Increased speed in consumption each year until 2017 – Fædrelandsvennen

Increased speed in consumption each year until 2017 – Fædrelandsvennen

– There is no reason to be very pessimistic on behalf of people. Real wage growth will not be as high as in the last ten brook, but it’s going to be positive.

Governor Øystein Olsen refuses to use the word “crisis” if it happens in the Norwegian economy. He promises continued growth in purchasing power for most people.

Yet he came yesterday out of box thinkers with interest rate cuts and weaker projections for the Norwegian economy until 2017. Olsen will be on the safe side.

– Monetary policy should be forward-looking. It is better to be safe than to be a little late, he said.

Therefore he surprised yesterday to cut its key rate from 1.5 percent to 1.25 percent. It was the first interest rate change since March 2012.

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Lower speed in consumption

Olsen puts down interest rates to stem the fall in oil prices and the impact of investment in oil and demand. But interest rate cut can not make up for all the negative happens, future developments will be weaker than Norges Bank believed in September.

Especially downward revision Norges Bank estimate for growth in private consumption much for the next two years. Nevertheless, consumption growth will increase each year until 2017.

The impact on unemployment is very modest. The remains unchanged at September level as the average for next year. Then increase it temporarily with 6000-7000 people in 2016. So it goes a little better again and for 2017 predicts Norges Bank that unemployment is back at current levels.

– Norwegian economy is, and has been robust. We are like that seen well equipped to meet the changes that are needed, says Olsen Aftenposten

He elaborates:

– We have general maneuver in economic policy. Unemployment is low. We have a fairly flexible labor market, there are many historical experiences that. And we have a separate currency in this situation acts as a buffer to boost profits in other business sectors when the oil sector get any problems.

– Are we now facing a growth pause or prolonged bad times ?

– It is the first. But the assumption that we are going through this transition in the way we predict and that oil prices do not fall further, so that the transition becomes even more serious. There is a pause in growth. Growth is fairly low next year, before picking up gradually to be described as more moderate, ie a little over 2 percent.

– So the good times come back?

– It’s going good times ahead too, as we see it. Most households will experience revenue growth continued, but not to the extent that they have had past 10-15 years. It is enough a period that might prove to be special in historical context as well, he said.



Can cut even more

It does not stop with Thursday’s rate cut. Olsen alerts that there is 50 percent chance of a new cut in the first half of next year. He also announced that there will be no rate increase before “the end of 2016″.

In other words, the interest rate remains unchanged or slightly lower in two years .

Last week let Statistics Norway forward their assessments of oil price fall and the prospect of 2017. “Flagged but brief decline” was the short version of SSB forecasts. The progress in Norges Bank’s projections are roughly the same.

– We envisage that growth will pick up gradually in 2016 and 2017, says director Birger Vikøren Norges Bank.

In response to improvements being wage increases better and inflation lower, so that the growth in purchasing power in 2017 will be twice as high as next year.

Many helpers

However, considerable restructuring is it anyway because the oil pressure decreases.

– It is adaptability in the Norwegian economy. I’m convinced, says Olsen.

A weaker krone and the announced rate cuts will help the economy through restructuring. If this is not enough, room to Olsen cut even more, and Finance Minister Siv Jensen can open money bag.

– There is room for maneuver in fiscal policy if the word “crisis” should really be justified, says Olsen.

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