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19 Mar 2015
Norges banks expected to cut rates in the upcoming meetings – TDS
FXStreet (Edinburgh) - In light of today’s unexpected ‘on-hold’ stance from the Nordic central bank, Strategist Jacqui Douglas at TD Securities believes that further rate cuts still remain on the table.
Key Quotes
“The Norges Bank surprised markets by keeping its policy rate on hold today at 1.25%, despite near unanimous expectations for a 25bps rate cut (and some chatter that a 50bps cut could be considered)”.
“Looking at the details of today’s forecasts, underlying inflation was little changed over the near-term, but revised substantially lower through from Q4 2015 onwards. So the Norges Bank is back to forecasting that it will not meet its inflation target”.
“It’s not clear from the Executive Board’s assessment why exactly the Norges Bank chose to wait in cutting rates, but our best guess is that there was desire to save some ammunition until it became abundantly clear that rates need to head lower”.
“Going forward, we think that more easing is in the cards, and probably a little more than the Norges Bank has signalled. We now look for another 50bps of easing by the June meeting, most likely to arrive in two 25bps cuts on 7 May and 18 June, but we couldn’t rule out a 50bps cut all in one shot in May, depending on how much deterioration we’ve seen by then in crude oil prices and in the macro data”.
Key Quotes
“The Norges Bank surprised markets by keeping its policy rate on hold today at 1.25%, despite near unanimous expectations for a 25bps rate cut (and some chatter that a 50bps cut could be considered)”.
“Looking at the details of today’s forecasts, underlying inflation was little changed over the near-term, but revised substantially lower through from Q4 2015 onwards. So the Norges Bank is back to forecasting that it will not meet its inflation target”.
“It’s not clear from the Executive Board’s assessment why exactly the Norges Bank chose to wait in cutting rates, but our best guess is that there was desire to save some ammunition until it became abundantly clear that rates need to head lower”.
“Going forward, we think that more easing is in the cards, and probably a little more than the Norges Bank has signalled. We now look for another 50bps of easing by the June meeting, most likely to arrive in two 25bps cuts on 7 May and 18 June, but we couldn’t rule out a 50bps cut all in one shot in May, depending on how much deterioration we’ve seen by then in crude oil prices and in the macro data”.