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.
Executive Summary:
- The Norges Bank made it clear across both the June and August policy decisions that the September policy decision would mark the beginning of the end of the Bank's COVID-era emergency policy stance.
- This clear communication has left markets with little doubt that rates will be hiked by 25bps to 0.25% - with market pricing following suit.
- Solid progress – particularly domestically – on economic normalization leaves markets looking through an assumed hike in September to instead focus on follow-up tightening in December and then throughout 2022 and into 2023.
- This leaves the market's priority on the rate path projections and terminal rate at the end of the forecast horizon.
Economic developments since the June projections continue to argue for a steeper set of rate path projections. Solid growth, underlying wage and price pressures and the recent uptick in the price of energy products (most notably, natural gas) will all feed into the technical factors of their rate-setting model.
But, despite this ample evidence of economic normalization, it's likely the Norges Bank remain cognizant of the downside risks still stemming from the COVID pandemic. The rise of the Delta variant globally has prompted a slowdown in the rollback of activity restrictions, hitting growth among trade partners and leaving the recovery at risk. As such, the Norges Bank will likely again lean on the judgement factor to pressure the front-end of the curve, eventually resulting in a terminal rate that still rests below the pre-pandemic 'neutral' rate.
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.