Norges Bank to Leave Rates Unchanged – Danske Bank
Research Team at Danske Bank, expects the NB to leave the sight deposit
rate unchanged at 0.50% and to re-iterate its dovish bias from the March
“Importantly, Thursday’s meeting is a short/intermediate one in the sense that no monetary policy report will be released. The focus will therefore be on the statement released and communication at the press conference.
Since the March meeting only few macroeconomic data releases have been released and the overall economic picture remains unchanged. While the latest releases point to a stabilising labour market, retail sales still leave open the risk of a more severe downturn in private consumption. On the other hand, housing prices have increased more than expected, re-introducing the risk of financial imbalances.
The key thing to look for at the May meeting will be how NB evaluates the trade-off between a higher oil price and the substantially stronger NOK. Indeed from a historical perspective the last month’s appreciation of the NOK would alone warrant close to a full rate cut. However, at the March meeting, we got a clear impression that the threshold for altering the rate path is becoming higher as rates are approaching zero. In short, we interpret the communication as implying that rather large deviations from the March outlook are necessary to alter the rate path.
In sum, we expect NB on Thursday to leave rates unchanged and to re-iterate its dovish bias from the March meeting. Given the economic outlook, NB’s dovish rate path and the stronger NOK, we still expect a final 25bp rate cut in September.”