Norway's 2017 budget likely to have little impact on Norges Bank's rate path

The Norwegian government published the 2017 fiscal budget today which is slightly less expansionary than Norges Bank’s projections.  It suggest Norges Bank will continue to buy NOK at a roughly unchanged pace in 2017 relative to this year. However, purchases are not aimed at strengthening the NOK. On the contrary, the fiscal rule is aimed at preventing NOK appreciation.

The budget implies that the government still requires withdrawals from the petroleum fund  at a yearly amount of NOK121.2bn. The size of the withdrawals is less than the estimated returns on the fund’s assets.

The budget showed that the government has a forecast for the borrowing requirement of NOK50bn. This is down from the 2016 supply target of NOK55bn and should on the margin be positive for Norwegian government bonds.