MNI REVIEW: Norges Bank On Hold; No Word On Tightening

The Norges Bank left policy unchanged in August, keeping the benchmark policy rate at a record low 0%, with the Monetary Policy and Financial Stability Committee seeing the economy evolving broadly in line with its latest quarterly projections, published in June. But policymakers did not repeat explicitly June's line that rates were likely to rise towards the forecast horizon.

The Committee's June projections were based on a collective rate path that showed the policy rate holding at zero for a couple of years before edging up in 2022 and reaching 0.5% in 2023, at the end of the forecast period.

In its policy announcement Thursday, the committee said nothing about future tightening.

UNCHANGED FOR SOME TIME

"The Committee's assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at today's level for some time ahead", Governor Oystein Olsen said.

No new economic projections was issued in August and while the committee said that "new information largely confirms the picture of the economic developments presented in the June Report," it did identify some downside risks.

While output picked up in line with its projections, with May data showing a 2.4% rise, the labour market was weaker than expected. The committee also cited concerns about a pick-up in Covid-19 infection rates, which have been low by international standards in Norway.

Inflation on the target measure, CPI-ATE, was stronger than forecast, hitting 3.5% in July. The committee said that the strengthening of the krone, which plunged in March as the Covid pandemic roiled global markets but has since rallied on its I-44 import weighted measure back to pre-pandemic levels, should bring inflation back down.