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Business optimism dims chances for new interest rate cut

Norway's central bank chief is dampening hopes that he and his board will cut interest rates again next week. New, optimistic forecasts from the country's technology sector may prompt the Bank of Norway to keep a tight rein on the economy.

Svein Gjedrem, who heads the Bank of Norway, got a sneak preview of a report produced by TBL, an organization representing some 4,500 tech firms with 125,000 employees.

TBL, a unit of the employers' group NHO, believes an upturn is on the way and signals that the industry is clear to compete for workers by offering higher pay.

That means Gjedrem may try to put the brakes on growth in the money supply by keeping interest rates high. Gjedrem has been keen to keep Norway's inflation rate low, with the result being that Norway has among the highest real interest rates in the world.

The current lending rate is pegged at 6.5 percent, meaning commercial borrowing costs even more.

A panel of analysts polled by Reuters believes Gjedrem will be forced to trim rates in line with international trends, but the TBL report dampens prospects.

Gjedrem has a record of basing decisions on the outlook for the labour market in Norway, and a rosy outlook may prompt him to try to discourage consumer spending and borrowing