Norges Bank Preview: No new signals expected – Danske Bank

Analysts at Danske Bank expect the Norges Bank to leave the policy rate unchanged at 1.50% and signal unchanged rates for the coming period.

• "We expect no new signals from Norges Bank (NB) at its monetary policy meeting on 23 January. Hence, we expect NB to leave the policy rate at 1.50% and reiterate that rates most likely will remain unchanged in the period ahead. Note that this is an interim meeting with no monetary policy report, rate path or press conference. Indeed in recent years, NB has tended to give very little new information at these interim meetings which fall only one month after the last monetary policy report.
• At the meeting in December, NB stated that 'the policy rate will most likely remain at this level in the coming period'. Meanwhile, the rate path implicitly suggested a 40% probability of a 2020 hike, highlighting a modest bias towards further tightening.
• Our base case remains a fifth NB rate hike in 2020 (in June), but the probability of this call materializing has arguably fallen in recent weeks. We estimate the true probability of another NB hike as marginally higher than 50% given the recent news flow. In comparison, markets price roughly 2bp and 5bp worth of cuts (accumulative) for end-2020 and end-2021, respectively. Hence we still see value in positioning for higher short-end rates."