Norges Bank (NB) kept rates unchanged at 0.00% and kept its neutral bias at today’s meeting. The next meeting is scheduled for 24 September. Economists at Danske Bank believe NB will be more upbeat at its September meeting, where they see a good chance of a new upward revision to the rate path. The analysts still see upside for the 5y segment of the curve and keep our positive NOK view.

Key quotes

“NB kept rates unchanged at 0.00% and kept the neutral bias (unchanged rates ‘in the coming period’). This was a ‘small meeting’, i.e. only a press statement. NB, as we expected, recognised that both private consumption and the housing market had developed better than expected and that inflation had been higher. On the other side, NB stressed that the ‘Committee gave weight to the considerable uncertainty surrounding further economic recovery’. Overall, NB concluded that ‘New information largely confirms the picture of the economic developments presented in the June Report’. So, no new signals today.” “EUR/NOK was spiking a tad post the NB policy statement, which overall provided no new signals. No game changer for NOK in itself, and near-term we think NOK is set to be subject to global reflation/recovery/risk gyrations. In this respect, the Fed message yesterday might have put reflation hopes on hold somewhat, which in itself acts as a NOK headwind.” “The absence of new NB signals today leaves EUR/NOK downside risk limited near-term after the strong run in NOK rates and FX lately. Thus, neither the June low (10.4307) nor July low (10.4642) is about to be taken out, in our view. For the longer-term, risks in EUR/NOK still appear tilted to the downside, as we believe pricing of rate hikes still has potential to be brought forward. We maintain our call that EUR/NOK has more downside risk near-term, targeting 10.40 in one-to-three months.”