Norges Bank Preview: Expected unchanged, favour tactical EUR/NOK shorts – RBS

Research Team at RBS, expects Norges Bank to leave the key policy rate unchanged at 0.50% at today’s policy meeting, in line with the majority consensus.

Key Quotes

“While the projected rate path presented in June suggested a likely 25bp rate cut in September, economic developments have been better than expected, inflation has been stronger than forecast and house price gains have accelerated. We therefore no longer see a sufficient case for further policy easing at this week’s meeting. EUR/NOK has lagged moves in rate spreads in recent weeks; we favour tactical shorts into Thursday.

Economic data over recent weeks suggest the worst may be behind for the Norwegian economy. Inflation has also substantially overshot the central bank’s forecasts since June. Perhaps even more concerning will be the rapid acceleration in house price gains.

Stronger growth prospects, higher inflation and a very buoyant housing market suggest Norges Bank refrain from cutting rates this month in our view.”