Expect Norges Bank to be on hold next week – Nomura

Research Team at Nomura, expects Norges Bank to keep rates unchanged at its meeting next week.

Key Quotes

“Since the last meeting in June, the growth outlook has generally improved, as we expected. Q3’s regional network survey showed a broad-based improvement in the growth outlook with a significant uptick in six-month growth expectations, consistent with GDP growth of 1.5% y-o-y. This helps to ease concerns about a slightly weaker oil investment survey in Q3 and the manufacturing PMI’s decline in August.

The other important development is the significant pick up in house price growth, reaching 9.1% in August, well above the 7.3% expected by Norges Bank across Q3. A frothy housing market poses a threat to financial stability, with Norway’s highly indebted households. Household lending rates have continued to decline since March, and we think Norges Bank will want to avoid providing further liquidity here.

Consumer price inflation has also picked up significantly more than Norges Bank expectations over Q3 at 4.0% in August; however, we do not view this as a big concern for the Bank. Norwegian inflation will experience negative energy base effects ahead (reaching 1.1pp by June next year) and concerns about weaker wage growth ahead.”