VIEW: Nordea: Super Hawkish Vs. Market Expectations

Nordea note that “there had been rife uncertainty re: if Norges Bank would follow through with its signalled rate hike in December, which became more of a wildcard after softer Norwegian macro data.”

• “We leaned toward an unchanged rate beforehand but pointed to the weak NOK as the only factor that could result in a hike. Norges Bank decided to increase the key rate from 4.25% to 4.50% as they put more emphasis on the weak NOK than the softer macro data.”
• “The rate path is revised slightly lower further out and shows one rate cut by the end of 2024, as we expected.”
• “Overall, Norges Bank expects one rate cut next year, before the key rate is gradually reduced to 3% by the end of 2026. Today’s outcome was super hawkish compared to what market expected beforehand: low probability for a hike today and five cuts priced for next year.”