Norges Bank maintains Key Policy Rate at 4.50% as expected; "the policy rate will likely be kept at that level for some time ahead"; will be a need to maintain a tight monetary policy stance for somewhat longer than previously projected

RATES

• “If the economy evolves as currently envisaged, the policy rate will continue to lie at 4.5 percent to the end of the year, before gradually being reduced,” says Governor Ida Wolden Bache.

STANCE

• Will be a need to maintain a tight monetary policy stance for somewhat longer than previously projected.

INFLATION

• Since the March Report, inflation has been a little lower than projected, while unemployment has increased as expected.


• Inflation is projected to decline further and approach 2% towards the end of 2027.

FORECASTS

RATE PATH

• 2024: Q2-2024 4.50% (prev. 4.51%), Q3-2024 4.51% (prev. 4.44%), Q4-2024 4.51% (prev. 4.29%)


• 2025: Q1-2025 4.42% (4.16%), Q2-2025 4.25% (prev. 4.02%) Q3-2025 4.06% (prev. 3.85%) Q4-2025 3.84% (prev. 3.66%)


• 2026: Q4-2026 3.11% (prev. 3.07%)

INFLATION (CPI-ATE)

• 2024: Q2-2024 3.99% (prev. 4.20%), Q3-2024 3.73% (prev. 3.89%), Q4-2024 3.47% (prev. 3.46%)


• 2025: Q4-2025 3.14%% (prev. 3.0%)


• 2026: Q4-2026 2.58% (prev. 2.55%)

Reaction details (09:08)

• The NOK saw marked immediate appreciation on the hawkish adjustment to forward guidance, with EUR/NOK falling from 11.3338 to 11.2928.

Analysis details (09:13)

• An as-expected rate decision but a particularly hawkish adjustment to forward guidance with all probability of a 2024 rate cut removed and a very very slim technical skew towards tightening being more likely than cutting for the remainder of 2024. Thereafter, the Norges Bank looks for the policy rate to be gradually reduced in 2025 with the forecasts pointing to the first cut occurring around Q2.


• From Governor Bache at 09:30BST we look for any further insight into the path and in particular whether further developments (i.e. another hawkish regional network report) could prompt further upward-adjustments to the repo forecast. In terms of 2025, any specific insight around what meeting/time period to expect the first cut will be keenly sought.

20 Jun 2024 - 09:00- ForexImportant- Source: Norges Bank