MNI NORGES WATCH: Rate, Guidance, On Hold In November
MNI (LONDON) - Norges Bank looks near certain to leave its policy rate on hold at 4.5% at its November meeting and should stick to its September guidance that the odds are against any start to its easing cycle this year with the rate likely to be "gradually reduced from 2025 Q1."
Headline inflation has been running above target and the vulnerability of the currency, amid heightened global political uncertainty and longer-term downward pressure on oil, has fed wariness over easing.
Governor Ida Wolden Bache, in an Oct 29 speech and Q and A session at the Peterson Institute in Washington, highlighted trade-offs for policymakers, with Norwegian households highly indebted by advanced economy standards at an average debt-to-income ratio of close to 250% and with unexpectedly large currency depreciation.
While the cash-flow monetary policy channel is strong, with any rate hike significantly impacting households who predominantly use variable-rate mortgages, the weaker krone has slowed the disinflation process by pushing up not only on the price of goods imports but also domestically-produced goods reliant on imported intermediate goods, she said.
She stuck to quoting the most recent guidance, for rate cutting to start in Q1 next year. With November a non-forecast meeting, the December forecast round is more likely to be the time for a reassessment, if any, of that guidance.
Poltical developments before December, including the U.S. election, may again change the outlook, with Wolden Bache saying that "larger global factors have played an important role" in what has happened to the krone.
Despite Norges Bank's guidance, some analysts still think the first cut could come as early as December while others are sticking to a Q1 call. Unchanged policy is universally anticipated in November.