- Norges Bank postpones first hike until summer 2015
- We believe next move will be a cut summer 2014
- Survey of petroleum investments indicates moderate growth in 2014
Norges Bank kept its key rates unchanged at 1.50% as expected. The new interest rate forecast indicates unchanged rates until a first hike in summer 2015. That is one year later than in the September report. Weaker price and wage growth, weaker GDP growth and lower rates abroad pull down while a weaker NOK pulls up. This was very much as expected.
We stick to our view that Norges Bank will cut rates twice next summer. Norges Bank’s view on the economy is still too optimistic. House prices are expected to show negative year-on-year growth in 2014, but will be back with positive growth late next year and consumption growth will be depressed for a rather short period. Remember that with a path signaling rates on hold for such a long time one must expect that downside surprises will lead to a rate path with a probability for a cut or a cut, rather than a new postponement of the first hike as we saw in today’s report.
Else today, Statistics Norway’s survey of petroleum investment showed a small upward revision of petroleum companies’ investment plans for 2014 and a slight downward revision of investment in 2013. Hence the survey indicates a nominal investment growth of 5-7% in 2014. This can be translated into a real growth on 2-4%, not far from our forecast (2%) or Norges Bank’s forecast in today’s Monetary Policy Report (4%).
Petroleum companies’ investment estimates for 2015 will not be available until May next year. Our forecast is a 10% drop in petroleum investments in 2015, while Norges Bank forecasts 1% growth.
Nordea