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Swedbank: Possibility of May Hike Should Be Close to Non-Existent

NORGES BANK
  • Not much should be expected from Norges Bank. The main message this coming Thursday will be that the policy rate “most likely” will be hiked by another 25 bps to 1.0% in June, as was communicated in March. But we will keep an eye out for any hints whether double or interim hikes could be on the cards, should inflation dynamics continue to firm ahead.
  • Put simply, Norges Bank would prefer to already have the policy rate at a ‘normal’ level. Indeed, should Norges Bank have published a new rate path this week, our calculations suggest they could have added another 40 bps to the rate path. And as the pressure to normalize is immediate, it would add little value to pencil in further hikes in 2024. Hence, there will be a continued front-loading bias for Norges Bank ahead.
  • The possibility of a May hike should be close to non-existing. Nonetheless, we believe Norges Bank prefers to hike at interim over doing 50 bps hikes, as this would be more in line with their preferred ‘gradual approach’.
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