Norges Bank on hold and first hike postponed

Norges Bank kept its key rates unchanged at 1.50% as widely expected. Its new interest rate forecast is consistent with a first hike at the earliest in March or later sometime in Q2 or Q3. There is a chance for another hike late next year. That is a small postponement from the June report which said a first hike either late this year or sometime during the first half of 2013.

The reason why Norges Bank lowered its interest rate forecast was that NOK was stronger than expected and interest rates abroad lower. Add to this that inflation was lower than expected. Lower money market spreads pulled the other way. But at least temporary the effect from the drop in money market rates is counteracted by the fact that banks so far haven’t decreased their lending rates to customers.

All in all there were no big surprises today. Norges Bank has postponed the first hike and is on hold. We stick to our forecast of a first hike in October 2013.