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Interest rates may rise earlier than first expected

The world economy is about to emerge from its downward slump, and the result may be that the interest rates rise earlier than first expected.

The indications of changes are apparent both from the US and from Norges Bank, the Norwegian Central Bank, and it can mean that the increase in interest rates is just around the corner.

John W. Snow, the American Secretary of the Treasury, stated that the market interest will most likely increase during the next months in accordance to the growth in the economy in general.

This information may be a bad signal for loaners both in Norway and the US. Norwegian experts have earlier stated that Norges Bank and its leader will probably cast a glance abroad to evaluate their next move.

Words of caution

At the same time as Snow warns about interest increase, Jarle Bergo, the deputy leader of Norges Bank, states that a low interest rate over a longer period of time is unfortunate. Bergo stated in a speech in Zurich Sunday that the risk for bobbles in the finance and the real estate market may be a reason to prolong the time perspective for the inflation level.

“These are words of caution that we are in an unusual situation, and there is no reason to believe that the low interest rate will continue for a long time,” said Steinar Juel, economist in Nordea to TV 2 Nettavisen.

Fears overheating

Norges Bank bases the interest level on the inflation level. According to Juel, the head of Norges Bank indicates that there are also other factors which may play a role in the development.

“What they are saying is that if they see an unfortunate development in the numbers of loans taken out, and severe reactions in the real state market, the head of the central bank will react by increasing the interest rate,” Juel said.

There exists a great deal of uncertainty among the economists of what will happen next. The prognosis varies from further cuts to a steep increase. Nordea operates with a prognosis where the first interest increase will arrive early next fall.

Juel stresses that even if the US increases the interest rate sooner than expected, that does not necessarily mean that this will spread to Norway.

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