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Norges Bank cuts 25bp, further easing possible - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 17, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Rob Carnell, Chief International Economist at ING, notes that the Norges Bank cut its key policy (deposit) rate from 0.75% to 0.5% at its latest policy meeting today, in line with expectations.

    Key Quotes

    “The accompanying press statement notes that the recent weakness of the NOK has helped to push up inflation, which was already close to its target of 2.5%, and now lies above it. Indeed, had this not happened, and had oil remained closer to $30/bbl than $40/bbl, then we believe they might have been even more aggressive.

    Even so, the statement keeps open the prospect of further easing in the months ahead, stating “The current outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the course of the year”, though they also note that “As the key policy rate approaches a lower bound, the uncertainty surrounding the effects of monetary policy increases. This now suggests proceeding with greater caution in interest rate setting”.

    That said, they also do not rule out the prospect that the key policy rate could turn negative, as it already is in their neighbour Sweden.

    For the moment, this does not seem to be weighing on the NOK, if anything, the currency is stronger following this release, perhaps viewing the hurdles to further easing as high.”
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