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Danske Bank analysts point out that Norges Bank kept policy rates unchanged at 1.50% at the December-meeting and believe that the intention is to be on hold in the near term but kept the tightening bias and was a little bit more hawkish than they had expected.

Key Quotes

“The executive board concluded that ‘the Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at this level in the coming period’. The rate path implies a 40% probability of a rate hike in 2020. The long end of the rate path was adjusted marginally higher to 1.55% (from 1.53%).”

“According to Norges Bank, the NOK has been weaker than expected, oil prices have been slightly higher, global interest rates have been higher and global growth prospects brighter – all of which points to an upward revision of the policy rate path. However, growth in the domestic economy seems to have been weaker than expected and is set to slow as expected.”

“We share most of the views presented in the MPR but we are a bit more optimistic about the global outlook and suspect the slowdown domestically is due partly to capacity problems. Hence, we still expect Norges Bank to hike rates by 25bp to 1.75% in 2020 but we now expect this to happen in June rather than in March, as previously expected.”