Hawkish Tilt May Push Back September Rate Cut Calls

NOK strengthens against the EUR, USD and SEK as the Norges Bank introduce a hawkish tilt to their policy statement. EURNOK did not quite reach the 20-day EMA at 11.7279 though, and has already pared losses a touch.

• Some analysts had flagged the hawkish tilt as a possibility coming into the decision, given the recent developments of the krone and the higher-than-expected labour union wage agreements.
• Guidance that the policy rate should be kept on hold for “some time ahead” was retained, as was the final paragraph which notes two-way risks to the policy rate relative to the March projections.
• The monetary policy assessment notes that while price inflation is slowing, it is still “markedly above target”. Furthermore, wage growth “may prove to be slightly higher than projected in March”.
• Overall, Norges Bank continues to lean hawkish, and today’s decision suggests that the current consensus for a September rate cut may need to be pushed back somewhat.
• The press conference (in Norwegian) begins at 0930BST/1030CET.