MNI STATE OF PLAY: Norges Bank To Deliver Hike, Keep Forecast

By David Robinson

     LONDON (MNI) - The Norges Bank's Executive Board is set to deliver a

clearly-signposted 25-basis-point rate hike on Sept. 20 and could well leave its

collective forecast for three hikes by the end of next year unchanged.

     The Board came as close as possible to pre-announcing a hike at its June

meeting, stating that the: "current assessment of the outlook and balance of

risks suggests that the key policy rate will most likely be raised in September

2018."

     This guidance was repeated in August, and subsequent inflation data came in

stronger than expected.

     The August assessment concluded "the upturn in the Norwegian economy

appears to be continuing broadly in line with the picture presented in June,"

when the bank had produced quarterly economic forecasts. But the board looks

certain to raise its near-term inflation outlook in this month's MPR.

     At the time of the June guidance the most recent data, for May, showed that

the 12-month rate for the target inflation measure, CPI-ATE, was 1.2%.

     CPI-ATE rose from 1.4% in July to 1.9% in August, leaving it within

touching distance of the bank's 2.0% target. Norges Bank's June forecast was for

1.5% in August, dipping to 1.3% in September.

     But the Executive Board's collective rate forecast may well be left intact.

     In June it assumed a 25 basis-point-hike in September but beyond that the

forecast path for the first half of 2019 was left unchanged from March, with the

key policy rate seen rising from its current 0.50% to 1.0% by June 2019 and

1.25% by the end of next year.

     As the Board said in June: "Uncertainty surrounding the effects of a higher

interest rate suggests a cautious approach ... the overall outlook and the

balance of risks imply a gradual rate rise in the years ahead."

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

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