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Swift vaccine rollout, hot housing make the case for a steeper rate path
When collating their September rate path projections, the Norges Bank followed the WHO's assumption that a vaccine would be in widespread use globally by "autumn 2021". It's clear today that this timeline has been greatly accelerated. Having come to an agreement with Sweden (Sweden will be over-procuring several vaccines via EU programmes and selling these on to Norway), Norway now expect to have inoculated close to a quarter of their population by the end of the first quarter. This should greatly reduce the threat posed by the Coronavirus to those most at risk, with the general population to follow shortly afterwards.
This makes the Bank's September assumptions well out of date. In their most recent monetary policy report they wrote: "If a vaccine is found quickly, growth will likely turn out higher than currently projected." As such, it seems likely a positive revision will be made to both growth and inflation projections this month, both of which will add upward pressure to the rate path.
Figure 1: NB only made minor changes to rate path projections in September
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.