The Norwegian central bank, Norges Bank, kept the interest rates on hold today, as was expected and in line with the March rate path. Furthermore, the central bank stated that the “current assessment of the outlook and balance of risks suggests that the policy rate will most likely be raised in June.” This evidently shows that it will hike interest rates in June, noted Nordea Bank in a research report. The March path gave likelihood of over 50 percent for a June hike, but not 100 percent, so this is evidently on the hawkish side.
Today’s new information implies that the outlook for the policy rate for the period ahead is slightly changed, said Nordea Bank. This is mainly because the March path gave a rather high possibility for a June hike. News since March has removed the little doubt that it had in March.
Capacity utilization seems to be rising greatly, as anticipated, while inflation has been a bit higher than expected. Nevertheless, the one thing that really would have raised the rate path if it were to be made today is only mentioned briefly: “The krone, measured by the import-weighted exchange rate index, is softer than assumed in the March Report”. At present, the Norwegian krone is 2.5 percent softer than the second quarter forecast.
“If this last until June it will not only rise that path so that it is fully in line with a June hike. It will also rise the path so that is fully in line with a hike again in December and most likely two more hikes in 2020, compared to close to one in the March path”, added Nordea Bank.
