VIEW CHANGE: Nomura See Terminal Rate at 4.50%

Nomura revise up their Norges Bank terminal rate view to 4.50% (from 3.75% previously) after this week's rate decision. They write that:

• Now expect three more 25bp hikes – with two at the August and September meetings and one at either the November or December meetings.
• They lean towards November as December is an MPR meeting so Norges Bank can set out the framework for a halt to further hikes.
• They see the labour market remaining very tight and leading indicators (notably the PMIs) suggest it is likely to stay this way. Norges Bank survey workers expect 4.2% wage growth over the next year. This raises the risk of a wage-price spiral.
• Inflation expectations are not well-anchored at 2% in the medium-term and is still someway off returning to ‘normal’ levels.