Whatâs Going On Here?Norwayâs central bank said on Thursday its economy could be strong enough to raise interest rates sooner than it thought â which would make it the first major currency-holder to do just that. What Does This Mean?The central bank decided to keep the countryâs interest rates at a record-low 0% for now, but it also said it was penciling in an increase for early 2022. Thatâs when itâs expecting economic activity to approach pre-pandemic levels â around six months earlier than its previous prediction.
That outlook stands out next to those of the worldâs biggest central banks, all of which are expected to keep rates low for a while to support their coronavirus-hit economies. See, one of central banksâ main tools for keeping things stable is lowering interest rates, which brings borrowing costs down. That should â at least in theory â spur individuals and companies to take out loans, spend cash, and boost economic activity. Why Should I Care?The bigger picture: Governmental block.
Norway hasnât just relied on central bank policy this year: itâs leaned heavily on government aid too. Youâd think that wouldâve served as an example for the US, which has been at a standstill over economic aid measures for months and is cutting it fine if it wants a deal before Christmas. At least the US central bank is doing its part: it reiterated its lower-for-longer interest rate policy on Wednesday, while promising to pump cash into financial markets to keep them afloat.
For you personally: Big whoop.
Interest rates â especially Norwegian ones â might not get your pulse racing, but knowing where theyâre headed can help you make your portfolio work harder for you. You might, for example, want to gear your investments more toward stocks than bonds when rates are low, because companies are able to borrow more money for less and, in turn, grow their businesses. A rate hike, on the other hand, could knock stock markets â and your portfolio â off balance, which is what happened back in 2018. | 