Norway Surprise Unemployment Drop Cuts Odds of Rate Cut in 2024

(Bloomberg) -- A decline in Norway’s adjusted unemployment rate that suprised analysts is likely to reduce the already low chance of a reduction in borrowing costs before next year.

The seasonally adjusted registered jobless rate for August fell to 2% from the previous month’s 2.1% that was the highest level in more than two years, data from the Norwegian Labor and Welfare Administration showed on Friday. While the figure was in line with Norges Bank’s projection from June, it defied the forecasts by all analysts surveyed by Bloomberg who had expected the rate to remain at 2.1%.

Norway’s central bank is yet to embark on any easing, contrary to peers the Riksbank and the European Central Bank. It’s backed by the Norwegian labor market, which has remained resilient thanks largely to demand for the nation’s oil and gas, even as the mainland economy has barely kept growing since the start of last year.

The jobless data adds to factors such as the weak krone that favor Norges Bank’s current aggressive stance of keeping its benchmark rate at 4.5%, among the most hawkish in the rich world.

“The previous month’s negative surprise — a sharper-than-expected rise in the unemployment rate — appears to have been just a temporary ‘scare’,” Marius Gonsholt Hov, Svenska Handelsbanken AB’s chief economist for Norway, said in a note to clients. “In this context, the latest figures for August should be reassuring for Norges Bank, as they continue to support the strategy of maintaining the current policy rate for some time ahead. We still expect the initial rate cut to occur in March next year.”

Kristoffer Kjaer Lomholt, head of FX and corporate research at Danske Bank A/S, said the report “no doubt reduces the likelihood of a rate cut from Norges Bank this year,” while pointing out it is the last labor-market report before the policymakers’ meeting next month.

--With assistance from Stephen Treloar.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.