MNI POLICY: Norges Bank Sticks To Guidance On March Hike

--Key Policy Rate Left Unchanged At 0.75%

By David Robinson

     LONDON (MNI) - The Norges Bank left its key policy rate unchanged at 0.75%

following the January meeting, the Executive Board said Thursday.

     The following are key points from the policy statement:

     -The board stuck to the line from its December meeting that "the policy

rate would most likely be raised in March 2019." Norwegian domestic data have

been robust and the gloomier economic news from the euro area and elsewhere has

not changed the board's view that gradual tightening is justified.

     -The board's January meeting was largely a placeholder. It is a non

Monetary Policy Report meeting, and the bank did not update its collective rate

path and economic forecasts but instead assessed progress relative to its

December projections. In December the implied probability, on Market News

estimates, of a hike after the March meeting was 90%.

     -The board acknowledged that the economic outlook abroad had become

gloomier and things were worse than it had expected. "Growth among Norway's

trading partners is slowing. New information suggests that recent growth has

been weaker than assumed in December," its said in its assessment.

     -The assessment cited the well known risks stemming from Brexit and

financial market volatility and the heightened uncertainty over global trade and

politics. This all contrasts sharply with the Norwegian economy where growth

remained solid and mainland, or non-oil, GDP may end up being stronger than

expected in Q4. With unemployment at just 2.4% and solid growth in employment

the board stated that capacity utilisation was back up at historic norms.

     -The mix of gloomier news from abroad and positive news on the home front

are a wash for the policy outlook. "In Norway, economic growth and labour market

developments appear to be broadly as projected, while inflation has been

slightly higher than expected. Overall, new information indicates that the

outlook for the policy rate for the period ahead is little changed since the

December Report," the assessment stated.

     -With no February meeting the board has left a very high probability on a

March hike. It now appears to only the crystallisation of external risks could

derail that hike.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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