James Smith, developed markets economist at ING, points out that the Norwegian central bank has gone against the tide and hiked rates to 1.5%, but the central bank’s tightening cycle looks like it has run its course for now.
Key Quotes
“The Norges Bank has cemented its position as the clear outlier in the global central banking arena, having decided to hike interest rates for the third time in 2019 at today’s meeting.”
“This wasn’t totally unexpected, as most analysts considered this would have been a close call. Oil investment/activity has been a key factor behind the central bank’s hawkish stance over recent months.”
“Norges Bank’s new rate path (which is little-changed versus the June edition) signals that this year’s tightening cycle has probably run its course for now. The bank’s press statement points to a number of uncertainties – Brexit, trade wars and geopolitical tensions in the Middle East – as reasons for caution.”
“We, therefore, suspect that interest rates will remain at 1.5% in Norway for the rest of this year. However, our base case assumes that some form of trade truce is struck in the first half of 2020 between the US and China. If this comes to fruition, and the UK avoids a ‘no-deal’ Brexit, then we think there is a reasonable chance that the Norges Bank hikes rates again next year.”
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