Norwegian central bank likely to keep interest rates on hold in May

The Norwegian central bank is set to meet this week for interest rate decision. According to a Nordea Bank research report, the interest rates are expected to remain unchanged. It is “an in between meeting” and there would be no new interest rate forecast. This signifies that the potential for major market moves is rather small. Still in the board’s general assessment the central bank is expected to compare the latest developments to the projections made in March.

With no rate path the focus would be on whether the board’s assessment shows any change in view. There has been some downside news since the March meeting. Inflation came in 0.3 percentage points below projection in March. Norges Bank might mention that there is uncertainty linked to the inflation figure, but inflation is evidently a downside surprise, noted Nordea Bank.

Registered unemployment, one of the vital indicators for the current level of capacity utilization, has moved about sideways the last months compared to the central bank forecast for as drop. The spread in the money market is at present 10 basis point above Norges Bank which also argues in the direction of lower key rates. Meanwhile, Norges Bank is expected to mention that oil prices are higher than anticipated. Norges Bank is expected to list slightly higher expected rates abroad as an upside news.

“Unchanged key rates and no signals of any significant change in view should be fairly neutral to market. We will however not rule out that the assessment point clearer in the direction of news being on the downside. In that case we could see weaker NOK and lower forward rates”, added Nordea Bank.

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