Norges Bank: Key Rate 0.75% (exp. 0.75%, prev. 0.50%); Sticks with June MPR for next move; "the policy rate forecast is higher than in the December Report and indicates a rise in the policy rate to around 2.50% (prev. 1.75%) at the end of 2023"

• "Based on the Committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised further in June", says Governor Ida Wolden Bache.


• 
  Repo Path: Mar’22 0.53% (prev. 0.51%), Jun’22 0.78% (prev. 0.70%), Sep’22 2.10% (prev. 0.92%), Dec’22 1.32% (prev. 1.11%). end-2023 2.35% (prev. 1.62%). Terminal 2.52% (prev. 1.75%)
  


• Activity in the Norwegian economy has continued to rise after containment measures were lifted in winter. Employment has increased further, and capacity utilisation appears to be above a normal level.


• The war in Ukraine has led to heightened uncertainty about the economic outlook, but there are still prospects for a continued upswing in the Norwegian economy.


• Price and wage inflation has been higher than projected, and wage expectations have risen. Rising wage growth and imported goods inflation are expected to push up underlying inflation ahead

Via Norges

Analysis details (09:13)

• As expected, the Norges Bank delivered a 25bp hike to 0.75%. However, the Committee elected to guide us to expect the next rate hike at the June MPR - pushing back, at this point at least, on some of the hawkish calls for a non-MPR hike this year. As such, four hikes are expected this year (incl. March), presumably at each MPR gathering. While this decision does disappoint some hawkish calls, and hence explains the pullback seen in the NOK after its notable appreciation vs. the EUR earlier in the session.


• However, while the near-term guidance disappoints, the terminal rate saw a significant hawkish lift to 2.52% (prev. 1.75%) and thus implies three additional hikes over the entire horizon.


• Overall, 25bp hike as expected, short-term guidance a 'dovish' increase to four 2022 hikes (vs prior three and against some calls for five) while the terminal rate saw a notable hawkish lift.

24 Mar 2022 - 09:00- ForexImportant- Source: Norges Bank