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According to analysts at TD Securities, after a strong run of data, next week’s Norges Bank hike is now nearly fully priced-in, and markets see about a 50% chances of hikes again in 2019H2.

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“We are somewhat more confident than this view and agree with the Norges Bank’s most recent forecast of an H2 hike (which we expect them to repeat at the upcoming meeting), but note that the risks of a pause in the second half of this year are non-negligible.”

“We see a number of key risks to the Norges Bank hiking a second time in 2019:

While risks of an imminent No-Deal Brexit have declined in recent days, Norway could be particularly exposed if risks of a No Deal Brexit outcome later on (say, in June) becomes an extended financial stability issue. Norway’s banks and mortgage lending company depend highly on foreign funding sources. According to a recent Norges Bank report, nearly half of bond funding was issued in foreign currency. The proceeds are swapped back to NOK via FX swaps. While we think the chances of major dislocation in the global financial system is remote, a major seizure in these markets could become a liquidity event for local banks in a worstcase scenario.

Another downside risk would be that global spillovers finally start to bite the domestic Norway economy. European growth has slowed sharply, and while the country has so far appeared immune to this, the shock may eventually propagate to firms there, which right now are driving growth as households remain more cautious.

Finally, it’s worth noting that of the G10 central banks, the Norges Bank can be the most unpredictable. With relatively light inter-meeting communication, the bank has a track record of surprising markets.”