Norges Bank Reveals a Slight Hawkish Bias Between the Lines
Norway Waits for Growth to Take Hold as Tightening Case Builds
(Bloomberg) -- Norway’s central bank gave the market plenty of reasons to expect higher interest rates this year, as policy makers pointed to a set of economic conditions that all point toward tightening.
The bank kept its main rate at 0.5 percent on Thursday, and reiterated its forecast for rates to start rising after the autumn.
“However, looking at the statement, most changes are marginally for the upside,” Kjetil Olsen, chief economist at Nordea Markets in Oslo, said in a client note. “Rates abroad are somewhat higher, as are oil prices.”
What’s more, “the fall in house prices over the past year has been somewhat smaller than forecast,” Olsen said. And “growth abroad has surprised Norges Bank slightly on the upside.”
All in all, the conclusions point to the bank clearly eyeing the exit after years of historic monetary stimulus. Nordea sees Norges Bank raising its main rate in December, Olsen said.
“The outlook and the balance of risks for the Norwegian economy do not appear to have changed substantially since the December report. The executive board therefore decided to keep the key policy rate unchanged at this meeting,” central bank Governor Oystein Olsen said in a statement.
As the economy of western Europe’s largest oil producer is approaching full capacity, policy makers in Oslo are preparing to raise rates for the first time since 2011. But with inflation well below target and a cooling housing market, the bank is seen treading carefully in its quest to tighten.
In December, the bank brought forward the timing of a hike and said that it’s ready to raise rates as early as Dec. 2018. Norway would be following neighboring Sweden, where the Riksbank is seen taking a first step toward exiting its negative rates in second half of 2018.
“Most changes are for the upside,” analyst Joachim Bernhardsen at Nordea said in a comment. The decision shouldn’t have a large impact on markets and if anything, it argues for a stronger krone given the probability for a small upward revision of the rate path in March, he said.
The central bank will give its next guidance on monetary policy at the March 15 rate decision.
To contact the reporter on this story: Sveinung Sleire in Oslo at ssleire1@bloomberg.net.
To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Stephen Treloar
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