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Joachim Bernhardsen, Strategist at Nordea Markets, notes that the Norges Bank left the key rate unchanged at 0.5% at today’s monetary policy meeting, but in a hawkish move, it confirmed that they still are on track to lift rates in September.

Key Quotes

“A September hike is fully discounted in the rate path. According to the path the next hike will follow in March 2019 and September 2019. The path is slightly higher than the one in March.”

“The main message in the MPR was much as we expected. Lower than expected inflation argues for a lower path and so do rates and growth abroad. Higher oil prices, stronger domestic demand and NOK remaining weak given the rise in oil price is the main reason why the path is still slightly higher than in March.”

“We think news going forward should be significantly on the downside to prevent Norges Bank from hiking in September.”

“According to our inflation forecast Norges Bank could be surprised on the upside.”

“Norges Bank’s view of a stronger NOK means that we can still see a quite significant NOK strengthening before the NOK being a constraint on monetary policy. In terms of EURNOK Norges Bank’s forecast can be trasferred into 9,20 in Q4, not too far from our forecast of EURNOK at 9,25 in three months.”

“To conclude; we were assured in our forecast Norges Bank will hike in September and then we should expect a gradual rise in rates the coming years.”