Norges Bank Preview: Forecasts from six major banks, high inflation forces to hike 50 bps

Norges Bank meets on Thursday, August 18 at 08:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of six major banks regarding the upcoming central bank's Interest Rate Decision. 

Markets are pricing in a 50 basis points (bps) rate hike to 1.75%. Furthermore, investors will be even more focused on the wording of the statement and on the press conference by Norges Bank Governor Ida Wolden Bache.

Danske Bank

“We now expect NB to hike policy rates by 50 bps instead of 25 bps after the recent high inflation numbers. However, there will be no press briefing as this is an intermediary meeting. We still believe that the policy rate will peak in December this year at 2.25% by hiking 50 bps this week, 25 bps in September, and 25 bps in December. If we are right in our call on NB, NOK FX is not expected to be much affected.”

TDS

“We look for a 50 bps hike from Norges Bank, in line with market pricing and the consensus, and despite the Norges Bank's most recent forecast of a 25 bps hike at this meeting. Inflation has been much stronger than expected, with headline and underlying inflation running 1.7ppts and 1.3ppts above the Bank's latest forecasts, respectively.”

ING

“Having hiked rates by 50 bps in June, on paper there are good reasons for Norway’s central bank to do the same again. Crucially the latest inflation readings have come in above the bank’s forecasts again. While the bank will be nervous about inflation, its models will also be acknowledging the fact that global market rates have fallen since June, which in isolation would be interpreted as a dovish factor. Bottom line: it’s a close call, though we narrowly favour a 25 bps move. As other central banks have found in recent weeks, Norges Bank faces a choice between sticking to its ‘forward guidance’, or adapting to the latest economic data.”

Commerzbank

“The fact that Norges Bank will raise the policy rate by 50 bps to 1.75% is likely to be largely priced in. Inflation is higher than expected by Norges Bank in June. It will therefore in all likelihood have to adjust its inflation forecasts upward again in the new monetary policy report in September. As a result, the basis for Wednesday’s interest rate hike is likely to be higher-than-expected inflation. I see a good chance that, on the basis of new, higher inflation forecasts that will be published in September with the new monetary policy report, it will then also raise the policy rate by another 50 bps and adjust the interest rate path accordingly. Hence, if Norges Bank plans to raise the policy rate by 50 bps in September also, it will in any case have to adjust the interest rate path upward once again. It would at least have to hint at that. What does that mean for the NOK? If the Norges Bank sounds restrictive and signals another juicy move for September, the NOK should be able to appreciate against the euro.”

Credit Suisse

“We anticipate nuance from the Norges Bank, where a 50 bps hike might still not be seen as a clearly hawkish development.”

Swedbank

“We expect Norges Bank to hike by 50 bps at the upcoming August meeting and in September, followed by 25 bps in both November and December. This should leave the policy rate at 2.75% by year-end, which we deem to be the peak.”