NOK: Norges Bank seen hiking and guiding higher – Danske Bank

Danske Research Team expects the central bank of Norway, Norges Bank to raise its policy rate by 25bp to 4.25% at the interim meeting, arguing there is little reason to delay given earlier hawkish signals. They also look for verbal guidance towards a second hike in June, while noting housing and labour data suggest the cost of re-anchoring inflation expectations remains manageable.

Policy rate hike and June guidance expected

"In Norway, we expect Norges Bank to raise the policy rate by 25bp to 4.25%. The March meeting indicated a rate hike was likely at one of the forthcoming monetary policy meetings, with the rate path suggesting a higher probability for June."

"However, the hawkish stance, aimed at re-anchoring inflation expectations, supports an earlier move. Given this, we see little reason for Norges Bank to delay the increase, particularly as two of the five committee members had already voted for a rate hike at the March meeting."

"Additionally, Statistics Norway will release Q1 wage figures, where monthly data point to annual growth slowing to 3.5%, noticeably below this year's wage estimates. This suggests that wage drift from late last year into this year may have been weaker than anticipated."

"In Norway, Norwegian house prices increased by 0.6% month-over-month in April, surpassing Norges Bank's forecast of 0.2%. While partially influenced by Easter effects, the annual growth rate of 3.8% remains below wage growth, highlighting the restrictive impact of monetary policy. Additionally, the vacancy rate rose to 3.0% in Q1, the highest since Q1 2025, underscoring strong labour demand and a tightening labour market."

"Despite these developments, the cost of re-anchoring inflation expectations appears manageable, supporting Norges Bank's cautious approach."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)