Norges Bank keeps interest rate on hold, removes easing bias

As was expected, the Norwegian central bank maintained its key interest rate at 0.5 percent on Thursday. But the Norges Bank, in a hawkish move, removed its easing bias as the interest rate forecast now is flat on 0.5 percent through 2018.

The central bank saw the development in the real economy as stronger than expected and upwardly revised its forecast for the output gap. Lower current inflation than expected signifies the inflation forecast for 2017 was downwardly revised, but partially as a consequence of a weaker NOK it is raised further ahead. The combination of a higher output gap and higher inflation is the reason why it raised the bottom in the rate path, stated Nordea Bank in a research report.

The arguments made in March and December were evidently for a lowering of the rate path without Norges Bank lowering the path. Thus, it was expected that the central bank would keep its easing bias, despite arguing for a higher rate path.

The Norges Bank projects 0.5 percent until the start of 2019. The first rate hike is fully priced in the fourth quarter of 2019.

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest