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Policy Change Unlikely, June to Get Another Namecheck

NORGES BANK
  • The Norges Bank stuck to their guidance and raised rates by 25bps to 0.75% in March. The bank also name checked the June meeting as the next most opportune time to tighten policy and signalled a further three hikes this year, bringing end-2022 rates to 1.50%.
  • This makes a policy change at this meeting unlikely, despite mounting inflationary pressures and buoyant wages. A rate hike at each quarterly policy report meeting is infitting with their preference for ‘gradual’ normalisation.
  • The 2023 rate path (new at the March meeting) was modestly more hawkish than forecast, with policy now seen rising well north of neutral, to 2.50% by end-2023. Despite the marked steepening in the rate path projections, the Bank again leant heavily on the exogenous judgement factor to suppress the front-end of the rate path.
  • This is inline with the Bank’s preference for ‘gradual’ normalization of policy and leaves little chance of either a 50bps rate rise, or a rate rise at a non-forecast round meeting. This reinforces expectations that the Bank will follow through with a rate hike at each policy report meeting (March, June, September, December) across both 2022 and 2023, leaving rates at 2.50% - a cyclical peak - at end-2023.
  • Full MNI Preview here: https://marketnews.com/mni-norges-bank-preview-may..
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