Great Sutherland News Section

National Bank of Sutherland (ÞSB) cuts interest rates a quarter-point

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ÞSB Chairman, Graham Zammit, told the press that "inflation has calmed down enough" to cut rates for the first time since February

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Godfrey Tilman-Holt
Political Correspondent
57 minutes ago
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After nearly a year of rate freezes, the National Bank of Sutherland (Þedessentralbænk Suþerland), Sutherland's central bank, has cut the interest rate in Sutherland from 2.5% to 2.25%.

This decision, reached by all but one of the nine board members, reflects the Bank’s growing confidence that inflation is under control. With inflation (CPI-H) down slightly at 1.6%, The ÞSB, whose statutory mandate is to maintain price stability and support sustainable economic growth, therefore judged that fears of rising inflation had dissipated enough to justify a modest rate cut.

A reduced interest rate means that investors have a higher capacity to borrow as their interest payments fall, as well as cutting flexible rates for loans and mortgages, although this also reduces the interest rate savers receive from commercial and civic banks.

Graham Zammit, who became the Chairman of the National Bank in April following his time at the Territorial Bank of Mellieħa, held a press conference at 14:00 ECST (04:30 Universal Time) announcing the first rate cut under his tenure. He also signalled that the country was "recovering", both from the 2017-2019 financial crisis (the "Crash"), and from stagflation issues during the early recovery period.

"During the last five years, we have had to first ratchet up the rate of interest in this country from its lows during the Crash into the heights of FY 2022, when it neared 4%, and then begin a series of controlled, reasonable steps back to a lower baseline. I am announcing today that we are to take another step-down, this time from the current rate to 2.25%, 25 basis points down from the current figure. The target rate of inflation in this country is 2%, and therefore we are increasingly comfortable in predicting that this trajectory will continue into the medium term."

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This cut to the interest rate brings it to its lowest level since the end of 2020, and follows a lower-than-anticipated inflation figure for the year to September 2025; estimates predicted that the rate would increase to 2%, but it in fact cooled to 1.6%, signalling an easing that has been seen in other areas of the economy. The unemployment rate has risen slightly to 4.5%, whilst wage growth has cooled to 3.9% in the year to September.

Economists and analysts have reacted quickly to the news, examining the surprise results from the BSS (Sutherland's statistics agency) that resulted in the rate cut. The right-of-centre Institute for Public, Economic, and Statistical Research (IPESR), a think tank on socioeconomic issues, has released an analysis of the figures as a result. "Across the board," the analysis began, "fears of overheating appear to have given way to an acceptance that the government and central bank may have overreacted, in fact, to the possible length and severity of the inflation spike that the country has been climbing down from since a few years ago." It went on to suggest that Zammit's statement that we "may be here again a few more times" was a strong hint the ÞSB would lower rates again repeatedly in 2026.

Sutherland's gradual cut to the interest rate is relatively unusual in modern times; the most recent time during which a gradual off-ramp was being performed by the ÞSB was after the 1989-1991 recession. The reason has largely been drawn to the transition of Sutherland from an "explosive, though uneven, recovery" into a "stable, but subdued, growth period outside the AI/tech sectors"; the AI/tech sectoral growth had in fact made speculators believe that a trimmed base rate was not on the cards.

Whilst the markets have rallied on the unexpected announcement - the H&H 100 has risen 2.7%, erasing most of the losses from the recent electoral results, while the EUTAV has risen 4% and the Breres Index by 2.2% - some more concerning undercurrents have been noted. Sutherland's economy in the post-Crash era has been referred to by some economists as "stagnant", with growth stuck at the 1.5%-2.5% mark until relatively recently - this is far lower than the 3-4% growth seen in the decade leading up to the Crash. The ÞSB's decision, the Centre for Public Policy Research (CPPR) - a centre-left think tank - was a "clear hint the Bank was weighing up an explosive rise in speculative gains in AI stocks and spending, and a relatively sluggish consumer market."

This conclusion arose from the latest PMI figures: the composite PMI rose modestly to 51.7 in November (whereby 50 marks the difference between growth and recession, thus 52 indicates moderate growth), while the manufacturing PMI stayed at 50.5, the services PMI rose to 51.6, and the construction PMI rose to 51.1; all of these are in the green, but just barely.

The rate cut has ignited political debate about the strength of Sutherland’s recovery from the 2017-19 Crash, with government ministers insisting that the news was a positive indication and would lead to greater investment, while the incoming left-wing parties of government implied that the lowering of the rate was an attempt by the Bank to ameliorate slow economic growth at the consumer level.

Labour's likely incoming Keeper of the Gavilsgild, Heather Symonds wrote on Wauker:

"It is clear that the inheritance of this incoming Renewal Government is dire, with anaemic manufacturing growth and falling wage growth. After six years of unsure government leading to uniquely poor growth, we will unshackle the Sutherlander economy through real investment, a pro-worker platform, and a Green New Deal."

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The demissionary (outgoing) government's Keeper of the Gavilsgild, Gutryck Hansson (Liberal), has stated that the latest rate cut demonstrates an increase in confidence in the Sutherlander economy.

"We came into power six years ago during a period of unprecedented recession and overspending. Through over half-a-decade of prudent, sensible reform, we have not only managed the recovery responsibly, but the markets are now repeatedly surprised with how positive the Sutherlander economy is performing. We hope that this legacy of responsibility and prosperity is not squandered by the incoming socialists..."

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Hansson also claimed that record GDP growth in the last year (3.3%), and the reduction of the deficit 2.2% of GDP, down from 7% in the last Labour budget in 2019, were "signs of Sutherland's boom under the Liberals".

Markets, economists, and consumers will now be awaiting the Bank’s next meeting, on the 14th of January, for signs of whether this marks the start of the broader easing cycle which Zammit hinted was upon the horizon.

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Also in the news:
— Labour and Greens agree to form "renewal government"
— VDA leadership contest "nearly confirmed", say insiders
— How the centreground shattered: an analysis
— President announces diagnosis with prostate cancer
— Rory Mackay: Election results prove the "radical left" on rise

Also in the news on the topic of Economics:
— Mixed PMI data undermines optimism from rate cut
— Sægan: We will rebuild manufacturing in Sutherland
— Lund stock up 24% this year after "bull market"
— How Averreþ became the Southern powerhouse city
— 51% would rather have higher spending than lower tax, ÞusHus finds

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