Norges Bank preview: Time for a breather – ING

ING analysts points out that the Norwegian central bank has hiked rates three times so far in 2019 with oil investment/activity has been a key factor behind this hawkish stance.

Key Quotes

“The recovery in global oil prices has seen both energy services, as well as investment in equipment, increase - especially given that break-even production costs are considered to be quite a bit below current market pricing for oil, according to the central bank.”

“But with global risks mounting, the Norges Bank signalled a prolonged pause at its September meeting. It’s latest projections have interest rates flatlining for the next couple of years.”

“We expect a similar signal at the next meeting on Thursday. While the Norwegian krone is noticeably weaker than the fourth-quarter average the central bank was projecting back in September, oil prices are a tad lower. All else equal, a weaker currency means a higher interest rate projection, while lower oil prices are assumed to reduce economic growth and therefore pull down on the rate forecast.”

“Putting the two together still suggests that there will be no more tightening this year (and we'd note we won't get a new set of forecasts this week). However, we wouldn’t totally rule out a further hike in 2020.”