MNI PREVIEW: Norges Bank On Hold; No Change Seen In Guidance

By David Robinson

     LONDON (MNI) - The Norges Bank is set to leave policy on hold at its

October meeting and is unlikely to alter its guidance of no near-term policy

changes.

     --In September, Norges Bank's Executive Board went for a 'one hike and

done' approach, increasing the policy rate by 0.25 percentage point to 1.50% and

publishing a collective rate path which showed only a very gentle upward slope.

     The October meeting is not going to be accompanied by an updated set of

forecasts so the probabilities attached to tightening will remain unchanged.

     --MNI estimates that the September rate path attached a zero probability to

an October hike and only a 50% chance of a hike through end-2020.

     Norges Bank Governor Oystein Olsen stated that the "balance of risks

suggests that the policy rate will most likely remain at this (1.50%) level in

the coming period."

     --The central bank is likely to state that the balance of risks has not

altered substantially since September.

     In an Oct. 8 speech Olsen said that in the central bank's September

projection "the policy rate remains close to today's level of 1.5 percent for

the next couple of years" and added that this rate path was a trade-off between

still-solid Norwegian economic growth and above normal capacity utilisation and

"considerable uncertainty about the global growth outlook."

     That is the line he is likely to stick to in his public commentary

accompanying Thursday's announcement and in his scheduled speech on Friday.

     --In his October speech Olsen noted that the Norges Bank had not previously

had to deploy non-conventional monetary policy tools available to it, and added:

"Nor is there anything, in our assessment of the outlook, to suggest it would be

appropriate to do so in the future."

     --The most recent data have largely been softer, with unemployment on the

volatile Labour Force Survey measure moving up to 3.8% in the June through

August period, above Norges' forecast, but the alternative registered

unemployment measure held steady.

     Inflation on the CPI-ATE measure nudged up to 2.2% in September, above the

2.0% target, underscoring why the central bank will be keen to keep the door

closed at present over easing.

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

[TOPICS: MT$$$$,MX$$$$]