Norges Bank stands pat in May, likely to hike interest rate in September

Norwegian central bank, Norges Bank, kept its policy rate on hold today, as widely anticipated. There was no rate path only the Boards assessment of the development since the March rate path. The main conclusion was that “Overall, the outlook and the balance of risks do not seem to have changed substantially since the March Report”. That was consistent with the expectation.

The central bank stated in its report that growth among trading partners is a bit weaker and forward rates lower. Furthermore, spreads in the money market is higher and that inflation has been on the downside. They also stated that goods consumption is a bit on the downside. On the other hand, Norwegian krone is a bit weaker and oil prices are higher.

However, Norges Bank provides the clear impression that it sees both low inflation and high spreads as temporary. On the inflation front, the central bank stated that “driving forces indicate that it will rise”. That is probably why the overall conclusion is neutral.

“We share Norges Banks view. Low inflation is temporary and Norges Bank will hike in September”, stated Nordea Bank.

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