Clear signals for Norges Bank rate cut

In a surprise move similar to December, but in the opposite direction, the Norges Bank decided to keep its policy unchanged at 1.25%, despite a somewhat weaker outlook than in December (consensus and market pricing: 1.0%). 

The Norges Bank cited that the effects of the fall in oil prices on the real economy have so far been relatively muted, despite prices dropping further by approximately $15/barrel since the December projections. 

At the same time, the Norges Bank expressed its concerns with rising house prices and their potential for increasing household vulnerability further ahead.

Barclays notes its views on Norges Bank's stance....

• Despite the lack of proactive policy at this juncture, we retain the view that further easing will have to be delivered. 
  
  
• Indeed, the Norges Bank highlighted the prospect for a reduction in the key policy rate as early as its next meeting.
  
  
• We remain bearish NOK in the near term. We expect oil demand-supply imbalances to materialize further in Q2 2015, prompting further revisions to the Norges' policy rate lower.