Norway’s housing inflation rises
The inflation in Norway’s housing prices accelerated to 12.8 percent year-on-year in December, the highest rate since mid-2007, real estate industry data showed, further reducing the probability of central bank rate cuts.
The central bank in December held its key policy rate unchanged at a record-low 0.5 percent and said it would most likely stay flat for a significant time, but added the chance of a rate cut was still greater than that of a hike.
“As long as house price inflation remains at this level it is unlikely that the central bank will cut interest rates further unless the economy is exposed to new large negative shocks,” DNB Markets economist Jeanette Strom Fjaere wrote.
Handelsbanken Capital Markets said it expected interest rates to remain at 0.5 percent for the foreseeable future.
“We also believe Norges Bank will continue to worry about financial instability stemming from the housing market for a long time, unless the housing market cools considerably faster than Norges Bank now expects,” Handelsbanken added.
“We are getting closer to a balance, and we are closer to covering demand,” Dreyer said, adding that a tightening of mortgage regulations, announced in December, would probably have an effect on prices.
“But I don’t fear a sharp correction in the short term,” he added.
Norway’s crown currency edged higher against the euro to stand at 8.9855 at 1320 GMT from 9.0081 just ahead of the 1000 GMT release.