Norges Bank Preview: Forecasts from seven major banks, on hold this time, another rate hike in June

Norges Bank meets on Thursday, May 5 at 08:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks regarding the upcoming central bank's Interest Rate Decision. 

Norges Bank is set to keep its policy rate unchanged at 0.75%. But the central bank is also expected to confirm a June hike at this week’s policy meeting.

Nordea

“Norges Bank will be on hold and confirm that the key rate will be raised further in June. We expect one hike each quarter throughout 2023 in line with the plan that Norges Bank presented in March. We believe that it will take a lot for Norges Bank to raise interest rates more often than four times per calendar year. We expect that the Committee will reiterate their message from March: ‘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’. Market reactions will likely be muted.”

Danske Bank

“We expect Norges Bank to leave its policy rate unchanged but to reiterate that it will most likely be raised in June. This would be consistent with the guidance put out in March, and as it is only an ‘interim’ meeting followed by nothing more than a press release, the threshold for deviating from plan would normally be high.”

TDS

“With no MPR, we think Norges Bank will stick to its guidance and hold its policy rate at 0.75% as recent data does not suggest the need for a hawkish shift. February GDP growth came in slightly below the Bank's most recent forecast and underlying CPI-ATE inflation remained at 2.1% YoY in March, 0.4ppts below what Norges Bank expected, and well below other countries' readings.”

Credit Suisse

“While the possibility of a rate hike is in our view limited, the Norges Bank could instead validate the idea of one more hike in 2022 (that is, validate the 105bps being priced in by markets, as opposed to the 75bps that the bank estimates). Alternatively, the bank could signal that in total it will hike rates by more than the 200bps it is signalling by Q4 2024, or that it will front-load hikes. The bank will not be releasing a full set of revised forecasts, but it could make changes in the statement that accompanies the rate decision. The market’s priced-in tightening expectations are mostly aligned with the Norges Bank’s guidance, in contrast with other G10 markets that are pricing in larger hawkish pivots. As such, market pricing leaves limited scope for an enduring NOK rally, even in the event of a surprise rate hike.”

Commerzbank

“I assume that Norges Bank will keep everything on hold at tomorrow’s meeting and will signal that the next step will follow in June. This way it is also able to wait and see how things develop. As Norges Bank’s rate hike cycle has already been priced in NOK’s appreciation potential for monetary policy reasons seems to have been exhausted for now. The rate decision is likely to be largely neutral for NOK.”

Swedbank

“Not much should be expected from Norges Bank this week. The possibility of a May hike should be close to non-existing. The main message this coming Thursday will be that the policy rate ‘most likely’ will be hiked by another 25 bps to 1.0% in June, as was communicated in March. But we will keep an eye out for any hints whether double or interim hikes could be on the cards, should inflation dynamics continue to firm ahead. Our expectation is for Norges Bank to end its hiking campaign at 1.75% by year’s end, and to refrain from hiking rates next year. We expect 25 bps hikes at the meetings in June, August, September and December.”

Handelsbanken

“It is widely expected that Norges Bank will keep its policy rate unchanged at 0.75%. But we strongly believe that Norges Bank will reiterate its call that the next hike is likely to come in June. Note that at these interim meetings (unless dramatic events have unfolded) Norges Bank tends to balance its public statements so that they are fairly in line with the message from the previous Monetary Policy Report. We believe that this is also likely to be the case this week.”