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Macro Comment Norway

Macro Comment Norway — Lower inflation target only affects interest rates long term

News since Norges Bank's December meeting suggests a slightly higher policy rate path. We believe the new path will indicate an interest rate hike sometime after summer. The lowering of the inflation target to 2.0 percent should not affect policy in the short term, but the neutral level for the policy rate is also equally lower, implying lower nominal rates in the long term. 

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

Macro Comment Norway — Interest rate hikes brought forward

Compared with Norges Bank's expectations from September, several factors, particularly the weakened NOK exchange rate and the higher oil price, are pulling in the direction of a higher policy rate path from Norges Bank. However, we believe the Executive Board's judgement will contribute to a smaller upward revision than the economic factors suggest. In sum, we expect the new path to indicate that the first interest rate hike is brought forward roughly a quarter, implying that the first hike will be fully priced in by March 2019.

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

Macro Comment Norway — Norges Bank basically on track

Compared with Norges Bank's expectations from June, different factors are simultaneously buoying and weighing on the interest rate path. However, the negative and positive shocks are close to offsetting each other. Accordingly, we believe Norges Bank's new path for the policy rate will not change much from the June trajectory, implying an unchanged policy rate until the second half of 2019.

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

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