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Analysts at Nomura expect no new signals from  Norges  Bank (NB) at its  monetary policy meeting  today as since its meeting in June, key figures have been a mixed bag.  

Key Quotes

“At 1.4% y/y,  core inflation  in July was higher than expected. Unexpectedly higher food prices was the main factor behind the upside surprise, probably due to the dry weather. That said, our core-core measure, which excludes the volatile components air fares and food prices, rose to 1.84%. This measure of ‘underlying inflation’ has risen steadily from 1.3% in February, and is still signalling an upward trend in underlying inflation as the output gap is closed and wage growth is rising.”

Unemployment  seems to be falling about as expected when adjusting the NAV-figure for collection date and new sample methods. On the other hand,  retail sales  fell more than expected in June, but  private consumption  still appears to be making a solid contribution to  GDP  growth in Q2.”

“The  manufacturing PMI  was far weaker than expected, actually falling below the neutral level (=50) in July – but this was due to very low response rates (summer holiday) and at the same time, the  Business tendency survey  form Statistics Norway, which is a much wider index, showed a rise to 9.2 in Q2, the highest level since Q4 10.”

“Finally, the  import-weighted NOK  is substantially weaker than projected despite a slightly higher  oil forward curve.  For many years, NB has expressed concern about a fundamentally unjustified appreciation of the NOK as this would tighten Norwegian monetary conditions. Meanwhile, at the June meeting the central bank sent an important signal to markets, namely that a stronger NOK is now justified.”

“Overall, the Norwegian economy is still looking to grow above trend, unemployment is falling and underlying inflation is moving higher. At the same time  housing prices rose again in July after being flat in June, especially driven by prices in Oslo. All of this suggests that NB will repeat signals that the normalisation of monetary policy will start with an interest rate hike in September. Finally,  global risks  are currently dominated by political events, but we find it unlikely that the current levels of risk will push NB into a more dovish stance. However, global developments will be mentioned as a negative risk factor.”