MNI REVIEW: Norges Bank On Hold, But Signals June Hike

By David Robinson

     LONDON (MNI) - The Norges Bank left policy on hold at its May meeting and

stated that the outlook was little changed from its March meeting, but narrowed

the timing of the next expected hike, stating that it was likely in June.

     The following are key points from the Norges Bank policy announcement:

     --The May meeting was an interim one, with no new forecasts published. The

one question going into the meeting was whether the verbal guidance would be

changed from that in March, when the Norges Bank stated that a hike was likely

in the next six months. In the event, the board chose to identify the likely

meeting at which the policy rate would be raised.

     -The Bank announced that it was leaving the policy rate unchanged at 1.0%

in May, a move which was widely expected and compatible with the collective rate

projection it published in March. The March projections, on Market News'

assessment, had attached a zero to 10% chance on a May hike with a 25 basis

point hike fully priced-in by September.

     -At its May meeting the Norges Bank narrowed its timimg outlook down to a

single meeting with Governor Oystein Olsen stating that "The Executive Board's

current assessment of the outlook and balance of risks suggests that the policy

rate will most likely be raised in June."

     -The guidance was not based on any significant change in the domestic data

flow or economic outlook abroad, but came to down to the tactical decisions of

the board.

     "In Norway, capacity utilisation appears to be rising broadly as expected,

while inflation has been slightly higher than projected. Overall, new

information indicates that the outlook for the policy rate for the period ahead

is little changed since the March Report," it stated.

     -The focus now will be on the new projections that will accompany the near

inevitable hike in June. The Norges Bank may well choose to show that the odds

are finely balanced over whether there is another hike late in 2019, but there

was no guidance on this in the May statement.

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

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