Norges Bank maintains its Key Policy Rate at 4.50% as expected, reiterates “policy rate will likely be kept at the current level for some time ahead”

ECONOMY

• "Since the June Report, inflation has been lower than projected, and unemployment is a little higher than expected. International policy rate expectations have fallen."


• "The interest rate has contributed to cooling down the Norwegian economy, and growth is now low."

NOK

• "On the other hand, the krone has depreciated and is weaker than assumed."

POLICY

• "In its deliberations on the monetary policy trade-offs, the Committee was concerned with the possibility that if the policy rate is lowered prematurely, inflation could remain above target for too long."


• "If there are prospects that inflation will remain higher for longer than previously projected, the policy rate may be set higher."


• "If there is a more pronounced slowdown in the Norwegian economy or prospects suggest that inflation will return to target faster than projected in June, the policy rate may be lowered earlier than previously envisaged.

Analysis details (09:10)

• Overall, as expected from the Norges Bank with the policy rate and forward guidance maintained while recent economic developments and the NOK were acknowledged. As such, we look to the September MPR to see if a dovish-tweak is applied to the repo path and/or verbal guidance; before that though, Governor Bache at 09:30BST may provide some insight.


• One point of note from the statement is the explicit reference to the NOK being "weaker than assumed", while this line is on face value merely pointing out price action since the last gathering, it could also be interpreted as a hawkish-signal. But, this is not necessarily anything surprising given the backdrop of today's decision was how the Norges Bank would balance recent dovish economic developments with the NOK's depreciation and a desire to avoid any further current weakness.

15 Aug 2024 - 09:00- Important- Source: Norges