Norges Bank to cut rates in September

Norges Bank cut rates as expected in June and presented a quite dovish rate path. The rate path indicates 2/3 probability of a rate cut in September. 

"A rate cut is expected, but Norges Bank is not expected to signal this already now. In the short term the view on growth and inflation does not differ significantly from Norges Bank so, a rate cut is expected in September. In the longer term, inflation is expected to fall short of Norges Bank's forecast and another rate cut is expected towards the summer next year", says Nordea Bank.

The short end prices less than one rate cut from Norges Bank at the most and even less is priced in the September FRA. 

High probability of a rate cut in September is seen and Norges Bank could remain in easing mode longer than markets are currently expecting. 

"The short end is expected to move lower as markets price in the risk of a significant downturn in the Norwegian economy. Long rates should follow euro rates", added Nordea bank.