A four-day general strike in Norway’s private sector ended on Thursday afternoon after the parties in the labour conflict reached an agreement.

The Norwegian Confederation of Trade Unions (LO) and the Confederation of Vocational Unions (YS) represented the employees, while the Confederation of Norwegian Enterprise (NHO) represented the employers.

The two sides agreed on a framework of 5.2 percent wage growth, with a large proportion of this given in general supplements.

While the unions were celebrating what they called a “historic win,” economists were quick to warn about the potential adverse effect of the deal on inflation.

A wage-price spiral in the making?

The agreement between the unions and businesses in this year’s wage settlement could lead to price pressure, chief economist Harald Magnus Andreassen at Sparebank 1 Markets told the news bureau NTB on Friday.

“If we set aside the industry and the power producers, then the rest of the business world is not doing so well. The increased prices were less than the rise in costs last year,” Andreassen said.

With wage growth of 5.2 per cent, these companies will be clearly pressured to increase prices, according to the economist, who believes the business world outside of industry and energy sectors will struggle with this year’s wage settlement.

Furthermore, the chief economist warned that the combination of the wage settlement and increased productivity could lead to inflation over time being well above 2 percent, which is the inflation target of Norway’s central bank (Norges Bank).

Other economists have also warned of the danger of a wage-price spiral forming, as rising wages put upward pressure on prices and inflation.

What will happen with interest rates?

In the run-up to the 2023 wage settlements talks, there has also been some discussion in Norwegian media on whether the outcome of the negotiations could – indirectly – lead to higher interest rates down the road.

Andreassen thinks the settlement will not lead to higher interest rates than what is already planned by Norges Bank.

“Norges Bank assumed wage growth of 5.1 percent. So this does not change much for them; Norges Bank will not reassess the outlook for wage and price growth (based on this outcome),” Andreassen said.

He pointed out that it is difficult to say anything for sure about inflation and interest rate trends, but he encouraged people to be aware that interest rates will rise.

“We could very well get a mortgage interest rate of around 5 percent. Adjust your personal finances today, and expect interest rates to rise. Use less money and pay down more debt. For many who have a lot of debt today, that is obviously the most sensible thing to do,” he said.