Norwegian Key Policy Rate (Sep) 0.25% vs. Exp. 0.25% (prev. 0.00%); based on the Committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised further in December

• Decision was unanimous


• A normalising economy suggests that there is no longer a need to maintain the current degree of monetary accommodation


• Repo forecasts: Sep'21 0.02% (prev. 0.02%), Dec'21 0.28% (prev. 0.28%), Mar'22 0.57% (prev. 0.57%), Jun'22 0.78% (prev. 0.78%), Sep'22 0.98% (prev. 0.96%), Dec'22 1.12% (prev. 1.07%)


• The policy rate forecast implies a gradual rate rise in the coming years. The policy rate path is a little higher than in the June 2021 Monetary Policy Report.
  


• The economic upswing will likely continue through autumn


• Underlying inflation is low, but increased activity and rising wage growth will help push inflation up towards the inflation target of 2%


• Based on the Committee’s current assessment of economic developments and the prospects for bank losses and lending capacity, the buffer rate will be raised to 2.0% in December

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Reaction details (09:10)

• Following the rate hike and signalling towards an additional hike in December, EUR/NOK fell from 10.1009 to a low of 10.0780 a few minutes later

Analysis details (09:15)

• As expected, Norges Bank delivered a 25bp hike commencing the policy lift-off that has been flagged as far-back as June. Additionally, they are now recycling this same verbal guidance to indicate a 'likely' hike in December. Note, the repo path hasn't been adjusted by any meaningful amount and was maintained at 0.28bp for December 2021, perhaps a reflection of the 'gradual rise' in the policy rate we are being guided to expect, given inherent uncertainty. However, bear in mind the unaltered repo may simply be more a reflection of its mechanics rather than an ambiguous policy signal.

23 Sep 2021 - 09:00- ForexImportant- Source: Reuters