General strike looms as Norwegian wage settlement talks head to mediation 

Mediation talks over this year's wage settlement between LO and the NHO began on Friday, with nearly 24,500 workers in Norway ready to strike if an agreement isn't reached by Sunday. 

Pictured is a business meeting.
Photo by Dylan Gillis on Unsplash

The Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO) will meet to try and find an agreement on this year’s interim wage settlement agreement. 

The parties first met in March but were unable to come to an agreement. This year’s deal only concerns wages as it is an interim settlement. 

READ ALSO: What is a Norwegian collective bargaining agreement?

LO has repeatedly said that it intends to push for a real wage increase for its members. Government figures estimate inflation in Norway will be at 4.9 percent for 2023, meaning a minimum rise of five percent would be required to meet the demands of the union group. 

On the other hand, NHO has argued that inflation figures don’t consider the projected profitability of businesses, which it argues are under increased pressure this year. 

“There are different earning capacities in the companies. Some are doing well, but the majority have a darker view of the future,” Ole Erik Almlid, leader of the NHO, told public broadcaster NRK.

If an agreement isn’t reached by Sunday, 24,500 workers from LO and the Confederation of Vocational Unions (YS) will be taken out on strike on Monday. The NHO and LO can also opt to extend the deadline if they wish. 

Several analysts told NRK that they expected wages in Norway to rise by between 5.25 and 5.5 percent this year. 

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Could Norway’s weak krone trigger a shock interest rate hike?

Despite an updated forecast from Norway's central bank stating the key policy rate was likely to remain unchanged for the rest of 2024, some think a weaker-than-expected krone could trigger a surprise rate hike.

Could Norway's weak krone trigger a shock interest rate hike?

Despite appearing to be on more steady ground in recent times, and some predictions that it could even strengthen in the coming months, Norway’s krone has suffered another slump.

On Wednesday, a euro was trading for 11.77 kroner, making one euro around 50 øre more expensive than in June. A British pound was trading for over 14 kroner, a record low for the krone. A US dollar was worth 10.79 kroner on Wednesday.

“When the krone is as weak as it is now, there is a real risk of interest rate hikes for Norges Bank again,” Nils Kristian Knudsen, a currency strategist at Handelsbanken, told E24.

Knudsen said the krone was weaker than Norges Bank expected it to be in its forecast. In June, the bank announced that it would change its interest rate path and that cuts wouldn’t arrive until early 2025.

The bank has been using interest rates to curb inflation and set a target of 2 percent. The latest figures that the national data agency Statistics Norway released measured annual inflation at 2.6 percent.

READ ALSO: Why Norway’s cost of living crisis is far from over

When the new interest rate path was unveiled, the bank’s governor, Ida Wolden Bache, said the weak krone contributed to inflation.  

“The devaluation of the krone that we have behind us still contributes to keeping price growth up,” she said.

For this reason, if the situation with the krone becomes dire, then the central bank could be forced to raise rates.

However, not all economists agree with Knudsen’s outlook.

Kyrre M. Knudsen, chief economist at Sparebank 1 SR-Bank, said that inflation slowing beyond forecasts was a sign a rate cut could actually arrive this year.

“Inflation fell a lot more than expected. It is so low that there may soon be an interest rate cut this year anyway,” he told E24.

He predicted a first cut to interest rates in December, followed by a further three in 2025.

Still, Kjersti Haugland, chief economist at DNB Markets, said that the krone exchange rate meant that the central bank was unlikely to cut rates before the end of the year.

She said that the lower-than-expected inflation has convinced the market that cuts will arrive before 2025, which has weakened the krone after it was initially boosted by Norway appearing to take a slower path to cuts.

Norway having higher interest rates than other countries, in theory, strengthens the krone as the currency becomes more attractive to investors. Therefore, a slower path to cut rates is attractive to investors. 

“The fact that, due to a lower-than-expected inflation figure, the market is starting to think that Norges Bank can cut interest rates before the end of the year means that the krone is losing some support. We stood out quite a bit since Norges Bank signalled that March (2025) was the most likely time for an interest rate cut,” she said.