The Norges Bank board, during its MPC-meeting in December, had hinted that they were mostly likely to lower rates in March rather than keep them unchanged. The Norges Bank was earlier expected to keep rates on hold in March. However, since the December meeting, most of the factors impacting the rate decision and the rate path have moved to the downside. The oil prices have further declined and are at present USD6-7/bl lower than expected in MPR 4/15. Global oil prices have also declined and are at present around 15-20bp lower at end-2016 than assumed earlier.

Risk appetite globally has fallen, increasing downside risks to risk premiums and global growth. Risk premiums have also caused a considerable rise in credit spreads, even in Norway. This brings an argument for lower interest rates and might actually increase downside risks if credit standards are tightened further. Moreover, the domestic key data, such as the CPI, have been mixed than expected. Also, given the decline in oil price, the import-weighted NOK is more or less on par with December forecasts.

"We expect Norges Bank to cut rates by 25bp at the meeting on 17 March. As our view on the domestic economy remains unchanged, we expect that to be the last cut in this cycle", says Danske Bank.