MNI STATE OF PLAY: Norges Bank On Path To December Hike

As policymakers at other central banks fuel market volatility with signals over future tightening Norges Bank looks set to continue along its pre-planned path, with its November meeting this week a stepping-stone to a December hike.

In its announcement on Thursday, the Norwegian central bank's Monetary Policy and Financial Stability Committee is likely to reassert guidance for a 25-basis-point hike in the final month of the year provided in September, when it initiated this cycle's tightening with an equally well-flagged move in the policy rate from zero percent to 0.25%.

Norges Bank's projected rate of tightening foresees a gradual rise in the policy rate to around 1.7% at the end of its three-year horizon. Its next forecast round is in December.

RELAXED ABOUT TARGET DEVIATIONS

With a rise in inflation globally, analysts have noted a strong correlation between central banks that have previously seen prolonged periods of inflation undershooting, and are now prepared to ride out higher inflation, such as the Riksbank, and those that previously saw overshooting, such as the Bank of England, and which now look poised to tighten.

Norges Bank is in the privileged position of not having to place great weight on deviations of inflation from its 2% target, Governor Oystein Olsen told MNI in an interview following the September hike. Norges is also different in that it puts more weight on financial stability than other central banks, he said, noting that the Federal Reserves' dot plot indicates that U.S. policy makers see their rates catching up with Norway's towards the end of the forecast period.