MNI STATE OF PLAY: Norges Bank Leaves Policy, Path Unchanged

By David Robinson

     LONDON (MNI) - Norges Bank's Executive Board left policy on hold its

October meeting, with the key rate remaining at 0.75%, and restated that a hike

in the first quarter of next year was likely.

     Following are key points from its October announcement:

     --The Executive Board's collective judgement remained that tightening is

likely early next year, not this year, despite stronger-than-expected inflation.

     "The Executive Board's assessment was that the key policy rate would most

likely be increased further in 2019 Q1," the statement said.

     --Market News's best estimate is that Norges Bank is implying a 26% chance

of a December hike in its collective rate judgement, with the path from the

September quarterly forecast round not altered in October. This month's meeting

is an interim one, with no new rate forecast path announced.

     --The key data have been running a little out of synch with Norges Bank's

forecasts, but, while inflation has overshot, growth has undershot, so the

message for policymakers has been ambiguous.

     "Economic growth has been a little lower and inflation somewhat higher than

projected, but the outlook and the balance of risks do not appear to have

changed substantially since the September Report," the board said.

     --Bank economists tweaked September's growth and inflation forecasts. They

raised the inflation forecast for the fourth quarter and marginally increased

the growth forecast.

     In the September Monetary Policy Report the target CPI-ATE measure, which

excludes tax changes and energy prices, was forecast to rise from 1.6% in the

third quarter to 1.7% in the fourth. In the October update, the fourth quarter

forecast was raised to 1.9%, in touching distance of the 2.0% target.

     --The Bank lifted its non-oil, mainland GDP forecast to an annualised

growth rate of 2.6% in the fourth quarter from 2.5% in the September forecast

round.

     This partly reflected firm business expectations, which held up despite a

drop in mainland growth between July and August.

     --The big picture is that the first quarter hike remains in place, with

debate now focussed on whether it is most likely to be in January or March.

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

[TOPICS: MX$$$$]