GJEDREM COULDN’T WAIT ANY LONGER (Dagens Næringsliv)

Central bank governor Svein Gjedrem does not believe Finance Minister Karl Eirik Schjøtt-Pedersen will be able to tighten up the budget sufficiently. Anticipating a neutral budget, he raised key rates for the fourth time this year, just two weeks before the budget is scheduled to be presented. Yesterday’s 0.25 point rate hike brings the total increase to 1.5 percentage points since April. The sight deposit rate is now seven per cent and the overnight lending rate nine per cent.

INTEREST RATES AT ZENITH (Aftenposten)

The central bank says key rates are about to peak, and experts believe further interest rate hikes may be avoided if the Storting keeps a tight rein on itself. Central bank governor Svein Gjedrem cautions the legislators against padding the budget with oil revenues. If they do not follow his advice, he will respond by raising key rates further. "Today’s rate increase is a warning to the Storting that it must not pour public oil revenues into the national budget," says Tor Steig, senior economist for the Confederation of Norwegian Business and Industry (NHO).

LABOUR LEADERS DEMAND GUARANTEED MORTGAGE RATES (Klassekampen)

After the fourth interest rate hike of the year was announced yesterday, organized labour responded by demanding the integration of social considerations into credit policy. "People should be able to refinance their homes with a mortgage from the State Housing Bank at low guaranteed interest rates set by the Storting," says Kleiv Fiskvik, head of the Oslo branch of the Norwegian Confederation of Trade Unions (LO). Student and borrowers’ associations demand active roles for the State Housing Bank and the State Educational Loan Fund in national economic policy.

CENTRE PARTY RE-EXAMINING COMMITMENTS (Dagsavisen)

Centre Party deputy chairman Åse Grønlien Østmoe is open to the idea of abandoning the centrist alliance. "We will not abandon our priorities," she says. The dividends tax and strategic assessments in an election year could induce the Centre Party to throw its lot in with Labour in the budget process. The other centrist parties—the Liberals and Christian Democrats—are still committed to the centrist alliance.

ORKLA BOARD TO EXAMINE HEYERDAHL (Dagens Næringsliv)

Åge Korsvold, the recently-appointed board chairman and the new Orkla board of directors will conduct the investigation of group CEO Jens P. Heyerdahl themselves. "An investigation must usually be conducted by outsiders in order to ensure adequate breadth, depth and objectivity," says Erling Grimstad, former public prosecutor with the National Authority for the Investigation and Prosecution of Economic and Environmental Crime (Økokrim).

IN-STORE POST OFFICES COMING SOON (Nationen)

The national postal service signed contracts yesterday with NorgesGruppen, Norway’s largest supermarket chain, and the Shell oil company, for the establishment of post office counters in 750 supermarkets and petrol stations around the country. The Postal Administration is also negotiating with other supermarket chains so that the overall number of post office counters operated by local supermarkets and petrol stations will initially be 1100, with plans to eventually increase the overall number of postal facilities from today’s 1300 to 1500.

WORTH NOTING

• An analysis by Statistics Norway shows that the impact of the interest rate hikes implemented by Norges Bank since April corresponds to around NOK 5 billion in cutbacks in next year’s fiscal budget. (Aftenposten)
• Figures published by the Ministry of Finance and the OECD show Norwegian petrol prices to be third lowest in Europe, measured against national wage levels. (Dagens Næringsliv)
• According to a recent report, spending on hospitals has never been higher than in the 1990s, when hospital budgets grew by 27 per cent. Gross operating expenses for general hospitals reached NOK 30 billion last year, but the volume of services provided has not kept pace with expenditures. (Aftenposten)
• The Kreditkassen and the Sparebank 1 Group could become Norway’s biggest bank if the Merita-Nordbanken acquire the Swedish Föreningsparebanken and subsequently receive permission to buy the Kreditkassen. (Dagens Næringsliv)
• Statoil has discovered a large oil deposit off the coast of Nigeria that could be as big as 300 million barrels. Statoil operates the Ekoli 1 block off the Nigerian coast. (Aftenposten)
• A maximum of fifty per cent in state support for movie productions is enough, in the view of the EU, which is inclined to use compulsion to bring Norway in line with EU countries. Not many Norwegian films would have made it to the silver screen in the past two or three years under such a constraint. (Aftenposten)

TODAY’S COMMENT from Nationen, Dagsavisen, Verdens Gang and Aftenposten

Norges Bank defied widespread recommendations by raising key rates yesterday. An interest rate hike with as little justification as this one is a provocation to most people. It is also another example of central bank Governor Svein Gjedrem’s insularity and arrogant conduct towards the political community, especially considering that this latest move comes right before the national budget is to be presented. (Nationen)

Central bank Governor Svein Gjedrem has acquired nearly as much power in shaping financial policy as the Ministry of Finance and the minister in charge. Mr. Gjedrem justifies yesterday’s interest rate hike by saying cost and price inflation in Norway are too strong and the krone too weak. This confirms the impression that Norges Bank regulates key rates on the basis of an overall assessment of the economy rather than the narrow purpose of maintaining a stable krone. (Dagsavisen)

The good news is that interest rates may have peaked. Mr. Gjedrem ventured to say that the next adjustment was as likely to be down as up, but before that happens, the Storting will have adopted next year’s fiscal budget. Recent opinion polls, together with next year’s general elections, have created an unstable situation. Many politicians are tempted to follow the lead of Carl I. Hagen and loosen up the purse strings. If this happens, we will all be paying higher interest rates. (Verdens Gang)

After several interest rate hikes this year, we are in a situation similar to the late 1980s and early 1990s, though with the important difference that a lot more people are at work. If the Storting manages to adopt a sensible budget, and if we are able to bring inflation down to a level comparable with our competitors, we need have no fear for the future. The central bank’s plain message is that interest rates will go down again if we only live within our means. Whether the Storting has understood this fact and will act on it remains to be seen. (Aftenposten)

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