Norwegian central bank likely to extend interest rate pause - Commerzbank

The Norwegian central bank, Norges Bank, had confirmed its wait-and-see assessment of September by keeping the key interest rate on hold in October. Moreover, it underlined that it considers the situation to be almost the same compared to the last monetary policy report in mid-September. At that time, it markedly cut the interest rate path and so heated speculated that not only an end to the rises, but even a swift turn towards interest rate cuts could be imminent, said Commerzbank in a research report.

However, both the economy and inflation would have to weaken significantly for this to happen, according to Commerzbank. Governor Oystein Olsen has reiterated that constant key interest rates over the “coming” period are the most likely monetary policy alternative.

Nevertheless, the soft krone might lead to rising inflation pressure and would therefore be a significant argument for resuming the cycle of interest rate hikes.

“In view of the continuing uncertainties in the global economic environment, Norges Bank should, however, act cautiously in order to avoid placing an additional burden on an economy that might cool down more than expected. So, the neutral outlook following the interest rate hike in September is justified for the time being”, added Commerzbank.