Norges Bank on hold in Sept, likely to maintain easing bias

Norges Bank at its June meeting had indicated an almost 100 percent probability of a cut in September, but the risk outlook has since changed significantly. Norwegian economy is picking up and that the risk of a deeper and more protracted downturn has decreased greatly reducing the need for further rate reduction.

Norwegian consumer price inflation slowed slightly in August, mainly due lower airfares. This is the third consecutive month that Norway’s inflation has come in much higher than projected. The Norges Bank may revise up their inflation forecast. This would also revise up their projection of nominal wage growth for 2017.

“The pass through from the weak exchange rate has been higher than expected and is the main reason why inflation has overshoot Norges Banks forecasts”, said Nordea Bank in a report.

Norway’s central bank is predicted to leave its key policy rate unchanged at a record low of 0.50 percent at a meeting on Thursday. However, the bank will likely keep an easing bias to avoid the krone from strengthening too much, according to DNB ASA and Nordea Bank.