Norges Bank likely to hold fire, recent economic data suggests recovering economy

The central bank of Norway is expected to remain on hold at 0.50 percent at its monetary policy meeting scheduled to be held today, as the recent print of a series of economic data suggest that the economy is recovering and that the need for an immediate rate cut does not seem likely.

In June, Norges Bank indicated an almost 100 percent probability of a cut in September but the risk outlook has since changed significantly. For one thing, there are now clear signs that growth in the Norwegian economy is picking up and that the risk of a deeper and more protracted downturn has decreased greatly.

Moreover, the housing market tightened considerably over the summer, with significant price increases, high turnover and limited supply. This means that a further rate reduction is no longer necessary when it comes to growth and is also less desirable when it comes to the housing market, given the risk to financial stability, Danske Bank reported.

"While the projected rate path presented in June suggested a likely 25 basis point rate cut in September, economic developments have been better than expected, inflation has been stronger than forecast and house price gains have accelerated. We therefore no longer see a sufficient case for further policy easing at this week’s meeting," research team at RBS commented.