Norges Bank: Hawkish tone from frothy housing market - Nomura

Analysts at Nomura notes that the Norges Bank kept rates unchanged yesterday, as widely expected by the market and the message was more hawkish than the market expected, with the depo rate forecast unchanged amid expectations of a decline.

Key Quotes

“While the reasoning behind Norges Bank’s decision sends a slightly mixed message, it does not change our view of NOK strength ahead.”

“Still expect NOK outperformance

Norges Bank growth forecasts have seen significant downgrades yesterday (including notable lowering of expected oil investment intentions). We see limited risks of further growth downgrades, which should tilt risks to the upside in terms of the market’s growth outlook for Norway through 2017, unless oil prices start falling again (which seems unlikely to us). With the market still pricing Norges Bank easing, we think this can support NOK strength in the future and we see EUR/NOK heading towards 8.80 in the coming months.”