Senior economist Rory Fennessy has criticized Norges Bank’s current monetary policy stance, arguing that interest rate hikes are failing to curb core inflation because the underlying price pressures are driven by supply-side structural issues rather than excess demand.
Fennessy, writing in a recent analysis, stated that the central bank’s inability to bring down core inflation highlights the limitations of using interest rates to combat inflation rooted in supply constraints.
He suggested that traditional monetary tightening is an inefficient tool when the primary driver of price increases is not consumer spending but rather structural bottlenecks in the economy.
This critique arrives as Norwegian financial markets navigate a period of volatility.
Earlier in the week, shares in DNB, Norway’s largest bank, and flag carrier Norwegian fell sharply on the Oslo Stock Exchange following the release of quarterly financial results.
The banking sector has been particularly sensitive to interest rate expectations, with investors closely monitoring how the central bank’s policy path will impact net interest margins and loan loss provisions.