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Joachim Bernhardsen, Research Analyst at Nordea Markets, suggests that the new rate path from Norges Bank is obviously not a support to thier forecast of three hikes next year and thinks that Norges Bank is too bearish on the economy.

Key Quotes

“With the risk of sounding grumpy after being too hawkish in our rate path call, we struggle to see some of the reasoning behind the downward revision.”

“From time to time Norges Bank “pulls the rabbit out of the hat”, and these magic tricks can be hard to foresee. This time the magic trick  does, at least to some extent, smells of fear of being too hawkish in order to prevent further NOK strengthening.”

“We have a forecast for a more or less sideways EURNOK for the remaining of the year, reflecting that the NOK could end up in some kind of vacuum following the initial hike. The next hike in March is still a long way off and it is probably too early for this to be an important driver for the NOK.”

“Over the next couple of months we fear that EURNOK can be stuck in range bound trading around the 9,50-level.”

“Our medium-term view remains NOK positive. Monetary policy divergence towards ECB in particular will increase next year as Norges Bank moves forward with hiking rates. This should offer support to the NOK.”