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Macro Comment Norway

Macro Comment Norway — Norges Bank to frontload policy rate hike(s)

Norges Bank's policy rate forecast from March implies another rate hike by September. However, given the central bank's apparent eagerness to raise the policy rate, a June hike is now as good as set in stone, in our view. Even though we believe global weakness most likely will prevent the central bank from hiking after June, we see a significant risk that Norges Bank will try to hike as much as it can before it is too late, and therefore raise the policy rate one last time this autumn.

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

Macro Comment Norway — Norges Bank to hike its policy rate next week

Domestic momentum is holding up well, and core inflation is hovering above the 2 percent target. With this backdrop, we believe Norges Bank will hike its policy rate next week and also continue to signal anoth-er rate hike during the second half of the year. However, the longer-end of the rate path may be lowered slightly, as international factors yet again weigh on the policy trajectory.

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

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

In September, Norges Bank surprised analysts by lowering its policy rate path. It seemed global uncertain-ties had made the central bank reassess its outlook for the Norwegian economy. In December, we believe Norges Bank will lower its policy rate trajectory again, effectively cancelling one of the six rate hikes it had planned for the coming three years.

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

Macro Comment Norway — Norges Bank to (slightly) lift its near-term policy rate path

In June, Norges Bank indicated that the policy rate would be increased by 25 basis points in September. Beyond that, Norges Bank expected two more rate increases throughout 2019, and a total of seven rate in-creases over the entire forecasting horizon (until the end of 2021). News since the June meeting has largely surprised on the upside. Against this backdrop, we believe Norges Bank will signal it is more likely than not with three rate hikes in 2019. But the outlook calls for a careful approach, and we believe Norges Bank will keep the longer end of the rate path intact.

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

Macro Comment Norway — Norges Bank to stick with March strategy

In March, Norges Bank indicated that the policy rate would be lifted by September this year. Beyond that, the central bank expected six more rate increases by the end of 2021. Since March, inflation has once again disappointed; in isolation, this suggests a lower policy rate path. On the other hand, the real economy is showing few signs of faltering and the oil price and housing market have been stronger than expected. We believe Norges Bank will present a forecast for the policy rate that is little changed from March, still indicating that the first rate increase will come in September.

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

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