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MNI Norges Preview-Jan '25: March Cut Still The Base Case

Norges Bank is unanimously expected to keep rates on hold at 4.50% in January.
Central Bank PreviewCEEMEANorges - PreviewCentral Bank ReportsNorwayMarketsStory

EXECUTIVE SUMMARY

  • Norges Bank is unanimously expected to keep rates on hold at 4.50% in January. At the December decision, the bank signalled that the policy rate would most likely be cut at the March meeting. There has not been enough new information domestically to shift consensus away from this guidance.
  • Markets are well priced for an uneventful rate decision and guidance paragraph. As such, the scope for a material reaction in NOK FX and rates appears limited at this stage.
  • The latest pullback in inflation has further increased the real policy rate, which has helped dampen mainland economic activity since 2023. As such, even if Norges Bank wants to maintain a restrictive policy stance for a little longer, it will need to cut the nominal policy rate soon to ensure rates do not pull too far away from the top of its 0-1% real neutral rate estimate band.
  • Looking ahead, analysts expect the first rate cut to be delivered in March (in line with Norges Bank’s guidance). The median forecast still favours quarterly cuts through 2025, but some analysts flag the risk of fewer cuts. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Norges Preview - 2025 - 01.pdf

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EXECUTIVE SUMMARY

  • Norges Bank is unanimously expected to keep rates on hold at 4.50% in January. At the December decision, the bank signalled that the policy rate would most likely be cut at the March meeting. There has not been enough new information domestically to shift consensus away from this guidance.
  • Markets are well priced for an uneventful rate decision and guidance paragraph. As such, the scope for a material reaction in NOK FX and rates appears limited at this stage.
  • The latest pullback in inflation has further increased the real policy rate, which has helped dampen mainland economic activity since 2023. As such, even if Norges Bank wants to maintain a restrictive policy stance for a little longer, it will need to cut the nominal policy rate soon to ensure rates do not pull too far away from the top of its 0-1% real neutral rate estimate band.
  • Looking ahead, analysts expect the first rate cut to be delivered in March (in line with Norges Bank’s guidance). The median forecast still favours quarterly cuts through 2025, but some analysts flag the risk of fewer cuts. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Norges Preview - 2025 - 01.pdf

norway real rates