Norway: Norges Bank cuts its policy rate, as expected – Goldman Sachs

Lasse Holboell Nielsen, Research Analyst at Goldman Sachs, notes that the Norges Bank cut is policy rate by 25bp, in line with their and the consensus expectation (Cons, GS: +0.50%).


“Norges Bank revised down its policy rate path by around 10bp-20bp over the next two years, not much different from our expectations, but by around 50bp by end-2018, somewhat more than we anticipated. (We highlighted a hawkish risk ahead of the today’s decision and the immediate market response was for the Krone to strengthen by around 0.5%.) 

Overall, we find yesterday’s decision to be on the dovish side given the large downward revision for 2018 despite the more moderate (as expected) revisions to domestic growth and inflation. Norges Bank’s path now indicates a base case of a 25bp cut in 2016 (with moderate additional downside risk) and its statement indicates that rates can go negative, should a significant shock hit the Norwegian economy (we do not find this statement particularly surprising). 

We continue to expect Norges Bank to remain on hold in the coming quarters following yesterday’s cut (despite Norges Bank’s downward-sloping path).”

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