VIEW: SEB: Front-Loading Rate Hikes As Inflation Accelerates

Following today’s monetary policy decision from the Norges Bank, SEB note that “the decision to deviate from its guidance and deliver a 50bps hike today was in line with consensus and fully discounted by markets. Prior to the announcement, the market discounted a further 50bps hike in September with a 90% chance of a similar move also in November. We are not surprised that the Committee refrained from signalling the size of the upcoming rate hike but given the clear message of the June path being outdated, and that a markedly higher policy rate is needed, another 50bps hike should be a done deal. We expect 25bps increases in November and December, but risks for the November meeting are to the upside and will depend on upcoming data. We reiterate that current front-loading of rate hikes is likely to severely impact household demand as interest rate sensitivity is very high, as shown in the historical plunge in consumer confidence in Q3. Hence, we expect the policy rate to peak in December as growth momentum will slow markedly going into 2023.”