Danske Bank analysts note that the Norges Bank (NB) this morning raised the policy rate by 25bp from 1.25% to 1.50%.
Key Quotes
“The rate path was adjusted downward, as global headwinds have lowered global forward rates, even though the weaker currency partly counteracted the effect in the short term. Signs of higher growth in labour supply are considered to increase potential growth, hence pushing the rate path downward. The rate path now suggests a 40% probability of a rate hike in H1 next year, with a high probability of this happening already in Q1. Importantly, this indicates that rates are more likely to rise than fall next year.”
“The rate path published in the Monetary Policy Report (MPR) was adjusted downward from Q2 20. Specifically, the rate path suggests a roughly 40% probability of the next hike to be delivered in H1 next year. Further out the rate path signals unchanged rates and then a roughly 30% probability of a rate cut in 2022.”
“The main takeaway from this meeting is that a rate hike is more likely than a rate cut next year. More precisely, the path suggests a 40% probability of another rate hike in H1 2020. As we consider the labour market to tighten further, we still expect NB to hike rates again in March 2020.”