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According to Erik Johannes Bruce, analyst at Nordea Markets, Norges Bank didn’t get quite through with its message at the last meeting and it meant to say was that June’s rate path still holds for the period ahead which implies that we should still expect a hike at the September meeting “” in line with the June rate path “” given no major change to the overall outlook.

Key Quotes

“Norges Bank moreover said that; “the global risk outlook entails greater uncertainty about policy rates going forward”. This sentence was not put in place with the intent to create uncertainty about the September hike. Norges Bank intended to communicate that there is more uncertain about additional hikes after the September meeting (going forward).”

“Governor Olsen use the word further ahead instead of going forward in a video explaining their decision making it clearer that the uncertainty affect its view on rates after September (sorry only on the webpage in Norwegian).”

“Still, we read lots of comments which interpret this as the end of the tightening cycle for now. Moreover, the market is pricing only in an 8bp higher benchmark rate (4-5bp for the September meeting). We believe this is either based on a misunderstanding of Norges Bank ´s communication, or an assumption that new information in the coming month will be so weak that Norges Bank will change view.”

“The global risk picture has forced Norges Bank to move slower with the tightening cycle than it otherwise would. However, domestic factors have driven Norges Bank to continue tightening even in the presence of greater global uncertainty. We still expect this to be the case looking ahead. Therefore, we advise to keep your focus on domestic figures if you want to know when the tightening cycle will end.”