MNI Norges Bank Preview - August '24: Little Scope For Tweaks
MNI (LONDON) - EXECUTIVE SUMMARY:
- Norges Bank unanimously expected to leave the policy rate on hold at 4.50% once again
- Policy statement and accompanying guidance will be in focus, with recent krone weakness needed to be weighed against lower-than-expected inflation outcomes
- The policy statement is likely to acknowledge the improved inflation outlook, but fall short of any meaningful tilt in guidance
Full preview including summary of sell-side views here: MNINBPrevAug24.pdf
Strong domestic price pressures (i.e. services and domestically produced goods), partially fuelled by strong nominal wage growth, have prevented the Norges Bank from deviating from its hawkish stance. These underlying pressures remained prevalent in July, with services excluding rents, rents and domestic goods series accelerating a little on an annual basis.
As such, we think Norges Bank will be able to maintain its hawkish guidance despite lower-than-expected inflation for now. However, it will probably have to concede eventually that price pressures have eased enough to warrant a less restrictive path for policy than currently envisaged. The September MPR may be an opportunity for such a concession.
