The Norges Bank are unanimously expected to leave the policy rate on hold at 4.50%.
Strong domestic price pressures (i.e. services and domestically produced goods), partially fuelled by strong nominal wage growth, have prevented the Norges Bank from deviating from its hawkish stance. These underlying pressures remained prevalent in July, with services excluding rents, rents and domestic goods series accelerating a little on an annual basis.
As such, we think Norges Bank will be able to maintain its hawkish guidance despite lower-than-expected inflation for now. However, it will probably have to concede eventually that price pressures have eased enough to warrant a less restrictive path for policy than currently envisaged. The September MPR may be an opportunity for such a concession.
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