Den norske nationalbank overraskede ved at sætte renten op med 50 basispunkter – til 1,25 pct. Nordea vurderer, at der kommer flere rentestigninger, så renten når op på 2,25 pct. i år og 3-3,25 pct. i slutningen af næste år. Økonomien har udviklet sig langt værre end forventet, og Nordea konkluderer i en analyse, at centralbanken erkender, at den har et inflationsproblem, og at det skal løses nu.
Norges Bank Review: Much higher rates ahead
Norges Bank somewhat surprising increased the key rate by 50bp to 1.25%. The central bank’s new rate path suggests a key rate at 2.25% by end-2022 and at 3-3.25% by end-2023. The risk around the new rate path is balanced, in our view.
Norges Bank surprised with a hawkish 50bp rate hike yesterday, bringing the key rate to 1.25% at today’s meeting and signalled even faster rate hikes ahead. The central bank has said that the key rate will be raised to 1.5% in August. Moreover, the rate path signals 25bp rate hikes at alle consecutive meetings and a key rate around 3% by next summer.
For the first time in a long while, there are both upside and downside risks to the latest rate path compared to mostly upside risk previously. Norges Bank says that the key rate may be raised faster than currently suggested, if the high pressure in the Norwegian economy or higher price pressures from abroad takes inflation higher than expected and/or the NOK weakens further.
However, they also highlight the risk that higher rates could lead to a quicker slowdown in the economy, both at home and abroad: “If inflation and capacity utilisation fall faster than projected, the policy rate may be raised less than currently projected.” This last sentence is a new formulation from Norges Bank, not seen in the previous Reports. We agree with Norges Bank that the risk now is much more balanced than previously when it comes to their rate path.
Much higher core and headline inflation throughout the forecast period and also somewhat higher capacity utilisation right now and higher rates abroad are the main reasons for the higher than expected raise in the key rate today and also for the faster rate hikes ahead. Even after today’s significant higher rate path than in March, their forecasts for core inflation is hovering around 3% the next 3 years vs. around 2.5% the next 3 years in their March report.
Surely, Norges Bank now think they have an inflation problem that needs to be resolved. As such, an even higher rate path could easily have been called for.