MNI NORGES WATCH: November Hold A Stepping Stone To Dec Hike

The Norges Bank is set to pause its tightening cycle this week, leaving its policy rate unchanged at 4.25% as it stays on course to hike one last time in December in line with its September projections.

Little in recent data would seem to push the Norges Bank to include a hike in its Nov 2 policy announcement. Inflation has surprised to the downside, while household and consumer credit demand dipped, though the data flow may not be weak enough to shift the guidance pointing to a December hike followed by keeping the policy rate high-and-stable for long at 4.5%.

Governor Ida Wolden Bache has talked of the need to keep policy tight for some time and is likely to stick to that line at the press conference following the decision. With a full forecast round not due until December, the November meeting looks set to be typical interim one, with a relatively brief commentary on economic developments.

OUTLOOK

The September forecasts showed the policy rate holding at close to 4.5% throughout 2024 and, as MNI has noted, the bulk of sell side analysts agree that it will peak at 4.5% with the only debate over whether a first cut may materialise earlier than Norges Bank projects.

Recent data have showed the 12-month rise in the target CPI-ATE measure, CPI adjusted for tax changes and excluding energy products, fell from 6.3% in August to 5.7% in September, markedly below the central 6.1% forecast. Norges Bank’s own survey showed softer credit in Q3 and an expected continuation of the softer trend in Q4.

Any surprise it is more likely to tilt against the December hike than to fuel expectations of a higher peak, but the central bank is more likely to act cautiously and maintain its guidance as it pushes down on inflation expectations.