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Executive Summary:
- Policy change unlikely in May, June meeting earmarked for next hike
- Inflationary pressure backs Bank decision to steepen rate path in March
- Markets see rates at 1.50% at year-end
The Norges Bank stuck to their guidance and raised rates by 25bps to 0.75% in March. The bank also name-checked the June meeting as the next most opportune time to tighten policy and signalled a further three hikes this year, bringing end-2022 rates to 1.50%. This makes a policy change at this meeting unlikely, despite mounting inflationary pressures and buoyant wages. A rate hike at each quarterly policy report meeting is infitting with their preference for ‘gradual’ normalisation.
The 2023 rate path (new at the March meeting) was modestly more hawkish than forecast, with policy now seen rising well north of neutral, to 2.50% by end-2023. Despite the marked steepening in the rate path projections, the Bank again leant heavily on the exogenous judgement factor to supress the front-end of the rate path. This is inline with the Bank’s preference for ‘gradual’ normalization of policy and leaves little chance of either a 50bps rate rise, or a rate rise at a non-forecast round meeting.
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.