VIEW: Swedbank: Data Dependent Ahead Of The September Meeting

Swedbank note that “Norges Bank is currently seeing both markedly higher inflation than projected, and a tighter labour market and higher wage growth than they foresaw in June. This speaks in favour of inflation being higher than projected both in the short and medium term. European energy, especially electricity, futures suggest inflation could continue to surprise to the upside going forward. Hence, Norges Bank deems their risk management to favour hiking faster now, to avoid falling even further behind the curve - being forced to counter with even faster hikes later. Although the Committee acknowledges that higher policy rates will have an impact on both consumption and the housing market, we expect Norges Bank to deliver another double hike in September.”

• “For Norges Bank to do that, core inflation for August will need to show little signs of moderation and an unchanged or lower unemployment rate. And we see that as a more likely outcome ahead. We should also not rule out a 75bps hike in September, but we deem that as having a small probability currently.”
• “On the other side, Norges Bank is stressing the risks to the real economic outlook, knowing a series of double hikes will have a marked impact on households. Indications of markedly slower growth in the September Regional Network survey could prompt Norges Bank to revert to standard hikes of 25bps in September.”
• “Our expectation is for Norges Bank to end its hiking campaign at 2.75% by this year’s end, and to refrain from hiking rates next year. We expect a 50bps hike at the meeting in September and 25bps hikes in November and December.”