Norwegian Key Policy Rate* N/A 3.75% vs. Exp. 3.5% (Prev. 3.25%); current assessment of the outlook and balance of risks implies that the policy rate will most likely be raised further in August.

RATE PATH

• Current assessment of the outlook and balance of risks implies that the policy rate will most likely be raised further in August.


• The policy rate forecast has been revised up since the March Report and indicates a rise in the policy rate to 4.25 percent in the course of autumn.


• Jun’23 3.20% (prev. 3.18%), Sep’23 3.88% (prev. 3.52%), end-2023 4.21% (prev. 3.60%), end-2024 3.98% (prev. 3.45%), end-2025 3.45% (prev. 3.02%)

INFLATION: 

• Inflation has been markedly higher than projected in the March Report.


• Higher wage growth and a weaker krone than projected earlier will push up inflation ahead.


• (CPI-ATE) Jun’23 6.58% (prev. 6.01%), Sep’23 6.30% (prev. 5.42%), end-2023 5.91% (prev. 4.88%), end-2024 3.94% (prev. 3.44%), end-2025 2.93% (prev. 2.64%)

Reaction details (09:10)

• In reaction to the larger-than-expected hike from the Bank amid the upgraded inflation profile throughout the forecast horizon, EUR/NOK fell from 11.6968 to 11.5423.

Analysis details (09:09)

• In short, the decision to hike by 50bps was above the consensus of a 25bps move.


• Decision to hike by 50bps was to arrest the slide in NOK and combat higher-than-expected inflation.


• Inflation path has been raised throughout the projection horizon with the end of year forecast 100bps above the March forecast.


• Heading into the release, the prior repo path implied a peak of 3.6% by year-end, this has now been revised to 4.21% with a peak of 4.25%. In terms of the outlook for 2024, the end-yr rate is now viewed at 3.98% vs. the March forecast of 3.45% which suggests around 25 bps of cuts in 2024.

22 Jun 2023 - 09:00- ForexImportant- Source: Reuters