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Danske Bank analysts note that the Norges Bank (NB) left the sight deposit rate unchanged at 1.50 % in a decision widely expected by both markets and analysts.

Key Quotes

“This was a ‘small’ meeting that only included a press release, a one-page ‘Executive Board’s assessment’ and an update of the bank’s short-term averaging models (SAM); i.e. there was no monetary policy report, revised rate path or press conference.”

“Overall, the board gave markets little colour on recent developments and as expected concluded: ‘The Executive Board’s current assessment of the outlook and balance of risks suggests that the policy rate will most likely remain at the present level in the coming period’. ‘In the coming period’ should in our view at this instance be interpreted as at least over the next main meeting in December even if the rate path from September suggested a longer period.”

“In the evaluation of the domestic economy, NB concluded that growth has been roughly as expected, but if anything moderately weaker in Q3. Also the 2020 fiscal budget is more contractionary than pencilled in back in September. Inflation has been exactly as expected, but on the other hand ‘…the weak krone may result in higher inflation ahead.’ NB also commented on mortgage rates having risen less than expected following the September hike and that money market premiums are tighter than projected (arguments for higher policy rates). On the external environment NB stated that growth has been a bit weaker than expected and that uncertainty surrounding the US/China trade conflict and Brexit persists.”

In sum, NB clearly expects the policy rate to remain unchanged at least until over the next ‘main’ meeting in December. This is line with our expectations, but we still expect a rate hike in March 2020 on domestics and the recent NOK weakening.”