(Bloomberg) — Central banks in Sweden and Norway are both likely to end this easing cycle in less than six months amid an expected domestic demand-led rebound across the Nordic region, according to analysts at Nordea Bank Abp.
The Riksbank and Norges Bank will by July reach their respective terminal rates, at 2% and 4%, 50 basis points lower than their current levels, the Nordic region’s largest lender projected in its new economic outlook on Wednesday.
Nordea’s forecast on Sweden is largely in line with the consensus projection in the most recent Bloomberg survey of economists, and the bank had previously expected Sweden’s central bank would reach the 2% key rate by the end of this year.
In the case of Norway, Nordea’s estimates are much lower than the median forecast in Bloomberg’s most recent survey, which points to a steady reduction in Norges Bank’s key rate through the end of next year when borrowing costs are seen at 2.9%. Nordea in September saw officials delivering a total of three quarter-point cuts, to 3.75%, by the end of next year.
Norway will probably be less exposed to potential higher trade tariffs by US President Donald Trump than other countries, with unlikely fallout for improving prospects for the Norwegian economy, according to Nordea’s chief economist in Oslo, Kjetil Olsen. Still, Norway’s credit costs are set to be higher with the new US administration than they would be otherwise, he said.
While Trump’s expected policies are likely to cloud the export outlook for the whole Nordic region, “domestic demand may be decisive for economic growth in the Nordics in the coming years,” Nordea said. “We expect increased private consumption in the entire region as a result of good employment, lower interest rates and higher disposable incomes.”
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