Norway: No pressure for a rate cut – BNPP

Research Team at BNP Paribas, is not expecting any action from the Norges Bank policy meeting today and expect that rates are likely to remain on hold at 0.5%.

Key Quotes

“At its last meeting, the Norwegian central bank said that rates could potentially be cut again this year, which both the market and we interpreted as a suggestion that a cut was likely in September. However, the bank’s last meeting was in June, and the economic justification for a cut has waned since then.

The Norwegian economy is looking more resilient than it did three months ago; the bank’s quarterly regional survey recently pointed to more solid GDP growth in the months to come. Inflation has also picked up since the last policy meeting; it now stands at 4% y/y and is above the Bank’s target in virtually every category. Inflation is likely to remain high for the rest of 2016, we believe, but should ease in 2017. So, with a better growth outlook and a spike in inflation, a rate cut seems unlikely to us.”