MNI Norges Bank Review - August '24: FX Concerns are Clear

MNI (LONDON) - Executive Summary:

• Bank keeps headline policy rates unchanged, as expected
• Only marginal tweaks made to the policy statement, leaving consensus looking for first cut in December
• No new path projections or economic forecasts in August, leaving September’s MPR as the next focus

Full review including summary of sell-side views here: MNINBRevAug24.pdf

The bank’s guidance on rates was infitting with the uprated guidance from the June MPR, stating that the policy rate is to be kept at current levels “for some time ahead”, gelling well with June’s "at today's level for some time and somewhat longer than we had envisaged earlier." The reference to keeping rates unchanged “to the end of the year” was dropped – however the August statement still suggested this was the base case among the committee barring a considerable growth or inflation surprise.

The bank’s concerns around currency volatility and the value of the NOK clearly remain top of mind. The language concerning FX rate fluctuations was upgraded to the committee being “particularly” concerned with the developments and their potential impacts on inflation. This sentiment played out further in the press conference, with an introduction that focused on the currency. The governor tied NOK underperformance to external factors (potentially dialling down the role rate-setting has played in currency dynamics), and talked up the threshold to intervention, as well as the advantages of having a floating FX regime.