No change in rates from Norges Bank. No more chance of a cut short term
Norges Bank kept as widely expected key rates unchanged. Norges Bank raised the interest rate forecast in the short term as we expected and there is no more risk of a cut. That was in line with our view, but not consensus. Longer out the path is somewhat lower as we expected. The first hike is fully in the path at the end of 2016 and there are only two hikes in the path.
As we expected both higher capacity utilization, higher inflation and weaker NOK pulled up while lower rates and growth abroad pulled down compared to the June forecast. In the longer term lower rates dominate and the rate path is slightly lower.
No reason for us to change view on key rates. The will remain 1,50 for a long as we make forecast. Growth will be slow inflation lower than Norges Bank forecast and any mention of a rate hike with ECB on hold will trigger a stronger NOK. The main downside risk is Draghi. NOK could be a winner if the euro weakens further. But so far we have seen no strong effect of that.
Nordea