Norges Bank likely to change its tone to rule out a September hike? – TD Securities

In view of TD Securities analysts, next week's Norges Bank meeting would normally be a quiet one, with no MPR and coming in the dead of summer but it will likely send a fairly clear message in the August statement as to whether it's still considering raising rates in September or not.

Key Quotes

“After the June meeting, we said that a September rate hike was still possible, but that in our view, everything would have to go right for that to happen. However, that's hardly been the case, and we think that we've easily had enough evidence to reach what we thought was a very low bar for the Norges Bank to push back its rate hikes.”

“In June, the Norges Bank said that its "current assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased further in the course of 2019." We think that language will have to soften substantially; probably not to the point where there's a question of whether the next move in rates will be higher or lower, but at least something to deliver a strong signal that a September hike is no longer in the cards.”

“The Norges Bank will likely still leave the door open to raising rates at the December meeting, but we don't think that markets will believe them, and likely see the September hike as a "now or never" decision. As a result, we look for markets to price out the 8bps or so of hikes that are still in place for September, leaving greater scope for market reaction than we usually see with the August Norges Bank meeting.”