7 May 2015
Norges Bank keeps rates on hold but might cut in June – ING
FXStreet (Barcelona) - The Norges Bank left its policy rates on hold, boosting the NOK, but given the central bank’s base case for a rate cut, an easing in June might be expected, notes Petr Krpata of ING.
Key Quotes
“The Norges Bank left the key policy rate unchanged at 1.25% today. Given the materially divided analysts’ expectations, NOK has seen a non-negligible rebound (EUR/NOK down close to 1%). We have been short EUR/NOK going into the meeting.”
“The Norges Bank reiterated that a rate cut (in June) is still on cards due in part to moderating inflation and downside risks to wage growth. However, this should not be necessary new news to the market given that one rate cut is currently a Norges Bank’s base case (as projected by its own forecast made in March).”
“Moreover, if oil prices continue increasing and inflation stabilises, a rate cut in June may not be warranted (recall the Norges Bank’s reluctance to ease monetary policy back in March, when oil prices were materially lower and a rate cut was expected by the market).”
“Today’s price action is in line with our 1-month EUR/NOK forecast of 8.35. Near-term, we see risks of EUR/NOK testing the 8.30 level, particularly if market expectations of an interest rate cut in June moderates.”
Key Quotes
“The Norges Bank left the key policy rate unchanged at 1.25% today. Given the materially divided analysts’ expectations, NOK has seen a non-negligible rebound (EUR/NOK down close to 1%). We have been short EUR/NOK going into the meeting.”
“The Norges Bank reiterated that a rate cut (in June) is still on cards due in part to moderating inflation and downside risks to wage growth. However, this should not be necessary new news to the market given that one rate cut is currently a Norges Bank’s base case (as projected by its own forecast made in March).”
“Moreover, if oil prices continue increasing and inflation stabilises, a rate cut in June may not be warranted (recall the Norges Bank’s reluctance to ease monetary policy back in March, when oil prices were materially lower and a rate cut was expected by the market).”
“Today’s price action is in line with our 1-month EUR/NOK forecast of 8.35. Near-term, we see risks of EUR/NOK testing the 8.30 level, particularly if market expectations of an interest rate cut in June moderates.”