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Macro Comment Norway

Macro Comment Norway — Norges Bank probably sees a lower likelihood of a cut

Since March, inflation has once again fallen short of Norges Bank's expectation, but the real economy has been stronger. We expect Norges Bank to keep its policy rate unchanged at 0.5 percent at its upcoming meeting but to lift its policy rate path slightly at the short end, thereby signalling a lower probability of the interest rate being cut in the near future. We believe that the longer end of the policy rate path will be low-ered slightly, as international interest rates have fallen since March.

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

Macro Comment Norway — Funny how things change

Housing prices have slowed considerably this year, and the slowdown has been broad-based. The underly-ing weakness, however, has been masked by nominal seasonality. In this article we show that, when taking seasonal factors into account, 11-12 counties are experiencing negative monthly change. We also show that there never was a collapse in the housing supply in Oslo last year. Demand side variations are still the key to understanding short-term price developments, both up and down. Finally, the downturn in population growth in Oslo is not "news."

Marius Gonsholt Hov, Senior Economist | maho60@handelsbanken.no

Macro Comment Norway — Only negligible changes to the key policy rate path ahead

We expect that Norges Bank will keep its policy rate on hold this week and that it will make only negligible changes to its key policy rate path. Our expectations are underpinned by our view that the surprising drop in inflation should be counterbalanced by somewhat stronger growth momentum combined with housing market concerns that are still elevated. Taken altogether, we believe the shorter end of the curve is likely to continue to point to a slight probability of another rate cut ahead. However, the longer end of the curve may be lifted to some degree due to a further increase in international rate expectations. 

Marius Gonsholt Hov, Senior Economist | maho60@handelsbanken.no

Macro Comment Norway — Housing market puts (soft) floor under policy rate

Norges Bank has changed its strategy, which we believe makes further interest rate cuts much less likely. Worries about financial stability and the housing market take centre stage, in practice putting a soft floor under the interest rate, we believe. Before Norges Bank cuts the policy rate any further, we would likely need to see much larger shortfalls in inflation and the real economy than previously. We therefore change our expectation for the policy rate and now expect it to remain at 0.5% for the foreseeable future.

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

Macro Comment Norway — Norges Bank to lower its key policy rate path

Since September, several factors pull in the direction of a lower interest rate path from Norges Bank: eco-nomic growth appears to be both slower and more fragile than expected by Norges Bank, wage and price growth seem weaker, the NOK is stronger and money market premiums have stayed higher. On the other hand, international interest rate expectations have increased somewhat and the housing market has once again surprised on the upside. We believe Norges Bank will keep its policy rate on hold at the upcoming meeting, but lower the path for the key policy rate, signalling an increased likelihood of a rate cut in H1 2017.

Marius Gonsholt Hov, Senior Economist | maho60@handelsbanken.no

Macro Comment Norway — Norges Bank to keep its policy rate on hold

Spiralling housing and consumer prices will probably make Norges Bank call off the announced rate cut at its upcoming meeting on September 22. However, we believe Norges Bank will keep its option of further easing ahead. We thus foresee that the key policy rate path will include a slight probability for a rate cut.

Marius Gonsholt Hov, Senior Economist | maho60@handelsbanken.no