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MNI Norges Bank Preview - January 2021: Placeholder After Dec's Hawkish Tilt

January's meeting sees no new rate path projections or inflation/growth forecasts. With so little time elapsed since December's policy report, an unchanged decision this month is almost certain, with focus remaining on Norway's vaccine roll-out and the continued resilience of the domestic economy to the second wave of COVID-19 infections.

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MNINBPrevJan21.pdf

The Norges Bank took an unapologetically hawkish stance at December's policy meeting, bringing forward their projections for the first rate hike by around two quarters to June 2022. This took markets somewhat by surprise, with the majority of sell-side analysts seeing only minor tweaks to projections but was inline with our preview (Norges Bank Preview: Swift vaccine rollout, hot housing make the case for a steeper rate path).

Figure 1: December's projections unapologetically hawkish

Source: MNI/Norges Bank

The longer-end of the rate path saw the most considerable shift, with the terminal rate boosted at end-2023 boosted by 36bps to 0.93%. The Norges Bank's more hawkish rate path is an endorsement of the government's vaccination campaign, in which the general population will begin being immunised from the second quarter of this year, thanks to a solid supply deal struck with Sweden. This was acknowledged in the Bank's policy report: "Vaccine availability will likely speed up the recovery through 2021 compared with that projected in the September Report".