17 Mar 2015
Further easing by the Norges Bank remains on the cards – TDS
FXStreet (Edinburgh) - Jacqui Douglas, Senior Global Strategist at TD Securities, expects the Nordic central bank to cut its refi rate tomorrow.
Key Quotes
“For the Norges Bank, the big question is going to be how much further easing, if any, it pencils into its new repo rate projections”.
“In the December MPR, the Norges Bank forecast about 12bps of easing out to Q2 2016, signalling a 50% chance that it would cut rates again”.
“And with crude oil prices sitting below the December projections of around the low-$70s, we think that’s enough to get another rate cut this week. However, the case for further rate cuts from here is not entirely clear”.
“We still forecast another 25bps cut in Q2, more likely at the June meeting than the May meeting, as we still see further downside for crude oil prices and we think that further macro weakness will eventually show up in the data”.
“But with evidence of weaker growth still elusive, we think that the Norges Bank will start putting more weight on household debt worries, and a little less on the downside risks to growth”.
“In this week’s MPR, we think that we may only see about 5bps of further rate cuts incorporated into the Norges Bank’s repo rate projections, as the Norges Bank believes that that downside risks to growth are a little less daunting now than they were in December”.
“So the message would still be that the next move in rates is more likely to be down than up over the coming few quarters, with the Norges Bank likely hoping that the threat of cuts is enough to keep a lid on any NOK appreciation”.
Key Quotes
“For the Norges Bank, the big question is going to be how much further easing, if any, it pencils into its new repo rate projections”.
“In the December MPR, the Norges Bank forecast about 12bps of easing out to Q2 2016, signalling a 50% chance that it would cut rates again”.
“And with crude oil prices sitting below the December projections of around the low-$70s, we think that’s enough to get another rate cut this week. However, the case for further rate cuts from here is not entirely clear”.
“We still forecast another 25bps cut in Q2, more likely at the June meeting than the May meeting, as we still see further downside for crude oil prices and we think that further macro weakness will eventually show up in the data”.
“But with evidence of weaker growth still elusive, we think that the Norges Bank will start putting more weight on household debt worries, and a little less on the downside risks to growth”.
“In this week’s MPR, we think that we may only see about 5bps of further rate cuts incorporated into the Norges Bank’s repo rate projections, as the Norges Bank believes that that downside risks to growth are a little less daunting now than they were in December”.
“So the message would still be that the next move in rates is more likely to be down than up over the coming few quarters, with the Norges Bank likely hoping that the threat of cuts is enough to keep a lid on any NOK appreciation”.