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ING analysts points out that the Norwegian central bank has hiked rates three times so far in 2019 with oil investment/activity has been a key factor behind this hawkish stance.

Key Quotes

“The recovery in global oil prices has seen both energy services, as well as investment in equipment, increase – especially given that break-even production costs are considered to be quite a bit below current market pricing for oil, according to the central bank.”

“But with global risks mounting, the Norges Bank signalled a prolonged pause at its September meeting. It’s latest projections have interest rates flatlining for the next couple of years.”

“We expect a similar signal at the next meeting on Thursday. While the Norwegian krone is noticeably weaker than the fourth-quarter average the central bank was projecting back in September, oil prices are a tad lower. All else equal, a weaker currency means a higher interest rate projection, while lower oil prices are assumed to reduce economic growth and therefore pull down on the rate forecast.”

“Putting the two together still suggests that there will be no more tightening this year (and we’d note we won’t get a new set of forecasts this week). However, we wouldn’t totally rule out a further hike in 2020.”