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MNI Norges Bank Review: June 2024 - (Still) the Last Hawk Out the Door

NORGES BANK
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EXECUTIVE SUMMARY

  • The Norges Bank held policy rates at 4.50%, as unanimously expected. The updated policy path contained an unambiguous “higher for longer” signal, peaking at 4.51% in Q3 2024 and Q4 2024.
  • The policy statement continued to stress that rates will likely be kept at peak levels “for some time ahead”, with the Committeee concerned “with the possibility that if the policy rate is lowered prematurely, inflation could remain above target for too long”. As such, Norges Bank have guided that rates will be kept at current levels until “the end of the year, before gradually being reduced”.
  • While an upward revision to the rate path was firmly expected, we think the extent of those revisions caught markets off guard. As such, NOK strengthened on release and through the day.
  • Following the decision, a number of analysts have pushed back calls for a September cut. Consensus now appears split between a first rate cut in December ‘24 (which would be dovish relative to the Norges Bank’s rate path) and March ‘25 (more consistent with the rate path).

Our full review, including a summary of sell-side views, is here:


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EXECUTIVE SUMMARY

  • The Norges Bank held policy rates at 4.50%, as unanimously expected. The updated policy path contained an unambiguous “higher for longer” signal, peaking at 4.51% in Q3 2024 and Q4 2024.
  • The policy statement continued to stress that rates will likely be kept at peak levels “for some time ahead”, with the Committeee concerned “with the possibility that if the policy rate is lowered prematurely, inflation could remain above target for too long”. As such, Norges Bank have guided that rates will be kept at current levels until “the end of the year, before gradually being reduced”.
  • While an upward revision to the rate path was firmly expected, we think the extent of those revisions caught markets off guard. As such, NOK strengthened on release and through the day.
  • Following the decision, a number of analysts have pushed back calls for a September cut. Consensus now appears split between a first rate cut in December ‘24 (which would be dovish relative to the Norges Bank’s rate path) and March ‘25 (more consistent with the rate path).

Our full review, including a summary of sell-side views, is here:


Keep reading...Show less