Norges Bank to remain as sole G10 central bank to hike rates? – Danske Bank

Daniel Brødsgaard, analyst at Danske Bank, points out that we are now one day from the Norges Bank (NB) meeting and with both the ECB and the FOMC likely to ease policy in the coming months the big question is whether NB is able to stand alone as the sole G10 central bank hiking rates?

Key Quotes

“In short, we think yes. Norway is much less of a traditional open economy than e.g. Sweden and last week’s Regional Network Survey indicated accelerating (!) mainland growth prospects across most sectors despite much weaker global growth prospects. The reason? Rebounding global petroleum industries, a weak currency, substantial rise in oil investments and large infrastructure investments.”

“As a result NB will have to balance A) a slowly overheating economy set to operate at above-trend potential in the coming 6-12M against B) elevated international risk factors. We think emphasis once again will be on the former and we expect both a NB 25bp rate hike tomorrow and a firm maintenance of the central bank’s tightening bias. This is in stark contrast to rates markets that price tomorrow’s hike as the last in the cycle.”