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Norges Bank is expected to hike the policy rate by 25 basis points to 1.00 percent at its monetary policy meeting on March 21. This seems to be widely expected, by both analysts and markets. However, there is an unusually high degree of uncertainty regarding the future guidance, according to the latest report from ANZ Research.
The factors affecting the rate path, i.e. the forward guiding, have moved more than usual, and in different directions. There is no doubt that the rate path will be adjusted downwards, signalling a less aggressive monetary tightening than in December, where the central bank expected five rate hikes in the forecast period.
The main reason for the downward revision is of course global developments, where global growth most likely will be substantially lower than expected in December, and global forward rates have dropped significantly as a result of this.
Currently, the weighted rates among Norwegian trading partners are roughly 10bp lower end-2019 and close to 40bp lower end-2021, compared to that in December.
"We still expect Norges Bank to signal another rate hike in 2019, most likely in September, and to signal further rate hikes in 2020-22, taking the signal rate to 2 percent at the end of 2022," the report further commented.
